the market cycle

Hello Interceptor,

I am with you. Watch the US Economy very closely. I trade the futures market and the exapnation the the last 2 years has been huge. China and India are on the move. The CRB (commodity)Index is at nominal all time high, passing the 1981 high. As everybody may have heard on the news gold is testing new highs. The nominal high in 1981 was about US$612 per ounce. In real terms the CRB Index and gold could break into a new secular bull maarket once you adjust for inflation. The same is with oil. It is testing new high’s in real terms, if it breaks above US$75-US$76 it could really take off. Demand is very tight and stories like Iran make the market nervous. Oil is normally correlated to inflation, but because of our technological advancements since the last oil crisis in 1979 and outsourcing blue collar labour to China and India for 8-10% of the cost here and in the US (yes that is a 90% discount on labour to big business) there maybe more delay and a faster reaction to inflation or it may simply mean that we could have incredable growth and low inflation. Be warned the bond market has a inverted yield curve since the start of the year. This would normally indicate a the US is heading for a recession in the coming year. However, with the baby boomers placing money into super accounts there is more money floating around looking for a home and prepared to take less yield.

The US is on a knife edge and Iran could be the hair that breaks the camels back. The higher the market, the greater the risk, the less it takes to revert.

So bascially the market will be choppy as we find ourselves moving from the 500 year trend of the Industrial Age and start the the Information Age.

Having said that the property market to me seems balanced. I am starting to hear horror stories as well as continued growth. This is usually the sign of consolidation or a sideways movement. If the market corrects you will hear them all screaming. Please note that real estate is not considered a liquid market so plan for the next 10 to 20 years considering the market. If the market turns and breaks to the down side it could go stone cold fore a short period.

For me I am only looking for +CF properties and they are few and far between. The medium term I think the upside in CG is overvalued at the moment and I have sold everything that is -CF, including my own house, it is cheaper to rent. I compare my returns to a Cash Managed Fund were I can get 5.3% for doing nothing. So why would I borrow for more to return less when CG has peaked?

Buy on value and let the market pay you the price. The recent property boom is very focused on price and CG and keeps paying more for less return. Sell overvalue and buy undervalue. Steve McKinght’s quick calc on +CF is great, if you can’t get +CF NEXT!!!

Keep smiling, it’s only a game[confused2]

Aaron

the 64million dollar question???????

ask any guru and you get completely different answers….

MichaelYardney says….
Our research shows that markets have bottomed in Sydney, Melbourne and Brisbane (this doesn’t mean we in the next boom yet!)

I am actively buying for myself – have for 6 months- and very strongly for clients.

and according to Bernard Salt , trendspotter for KPMG
“a modest upturn will kick off in late 2007,or perhaps 2008”
and “There’ll be another weak boom in 2018-2020”
and after that “all the baby boomers will be dead and then the property market will hit the wall”

weak boom 2018-2020……what???????
i’ll be dead by then

i’m sticking with micheal…….
hope your right?????

well the markets definitely heading south in melbourne, according to the numbers in sunday paper

melb metro Median 2004 /370k..2005 /360k
if you bought a year ago and sold told you would have lost 26k

had you bought BHP shares for same period you would have made $185k……

If you bought 5 years ago Median 251k
sold today, (no maintance costs) profit 84k…BHP profit 441K

looks like the cycles working well for shares at the moment….
and looks like minings got anought good year ahead, aws long as china keeps buying

there you go rewing

all to do with timing

why buy when its negative?

good call michael

stick with property…….
just reading the latest “hottest suburbs for 2006” in the sun over the weekend, there’s been some amazing growths….just in the last 12 months….
for example Glen Iris up 9.1%…in 12 months….72.9% in 5 years…wow

so what does that equate to in money terms.
Median house in Glen Iris 2000 410K…today 709k
lets put 10% down….. rent out $600/wk…NOT 1 cent spent on maintenance…. lets sell 5 yrs later……bring up excel spreedsheet…clunk..clunk..clunk..
profit $294K…..wow

but had the money been invested in BHP….Profit $745K….now thats a double wow wow

do you bernald might be a closet “share” trader??

Now thats a good suburb, but what if it was West Melb 5% growth in 5 years…381K to 400K..and rent of 300/wk
total profit – MINUS 46K..thats right minus….ouch…..

boring old coles shares……… profit $80K

diverification……….cause there’s just to many experts with mixed ideas

BHP 5 yr ‘basic’ chart

I was looking at this, but if the stock split welllll…there ya go [biggrin]

Hb..my last two IP’s I bough with $3k for one (deposit only but over 100% finance) and $0 for the last one.

I firmly believe you need a mix of Investments and find it very hard to compare either (probably not smart enough)..my preference though is for property

Its not Shares Vs property..BUT Shares And Property that will assist you position over time; after all using your equity to leverage into shares is chepaer and safer than margin lending IMHO

“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow Calculator

In the past I have been a currency dealer, stockbroker, dealt in the building industry and in IT. The last 5 years of my life I have spent 95% of my time on property. Now 5 years on I have a nice portfolio, live 250 mtrs from the beach and am learning to fly.

None of this possible without property!!!!!

Sure I have some small parcels of shares and will be adding more over time, but im a houses man first and last and feel there is enough diversity in residential, commercial, industrial, locally and interstate to absorb all of my efforts for some time to come.

My only great wealth has come from property. As I do most of my own reno work as well the savings and quality of work I can do gives me quite a lot of confidence that even in this lull in property in most sectors except WA, and SEQ units/townhouses, I can increase both equity and rental yields.

We intnd to hold our existing portfolio for quite some time and add to it as the opportunities present themselves.

Good luck all and dont forget, we are all different and thats what makes this all work so well.

Happy hunting

DD

Buyers Agent (Dip Financial Services(FP)
Don’t sweat the small stuff,and it’s all small stuff!!

Hi DD
i totally agree with your analysis…property is a great investment tool.
i know, i have used it very successfully.
but in hindsight, i could have done a lot better.
owning our own business and managing our own SMSF, we invested heavily into property post 92 (last recession).
we have just sold 1 property in the portfilio of properties, a penthouse in noosa heads.
even thou the CG was great, had we invested that money instead into Comm.Bank shares, today the return would be 1million ABOVE the return we got on the penthouse.
remember we dealing with SMSF…no borrowings
So the same problem arises today as 13 years later…
where to invest Shares or property?
except this time there’s in excess of 1 mil cash to play with….

So going back to the question….
Where is the cycle going?

i take on board everyone’s opinions
my gut feel is sideways……….for quite a while…..
there’s nothing in the economics of the country to say we booming..(unless your in mining, thanks WA)…retail sales stagnant…debt excessive…new IR laws to restrain wages……

but hey what would i know…