Aussie dollar at parity right now

yes absolutely - but not if IRs are hiked to match and contain. i know growth + high IRs = good, but not so good if your wage isn't moving to compensate.

and no, i'm not using govt stats - just what i see every day talking to people.

the key is the trifecta - inflation, IRs and wage growth.

wages haven't moved in real terms in a good 3-4 years. inflation is running, IRs are running.

that means that prices go up, cost of your debt goes up, but your ability to service said debt does not. if your wages aren;t moving then your debt effectively doesn't, either, because your money buys no more than it did previously.

from your cashflow scenario, that sounds like the same effects that deflation would have. but assets are gorwing, so where's the problem, right?

if no one can afford the rising costs, land prices fall but house construction prices go up because of inflation.

i'm not a bear, but just being realistic. property is still an amazing wealth vehicle, but play your cards close to your chest.

and it just something i've seen playing out. growth in this country will be hard to contain so here's a scenario that stops it.

wages are only a small part of servicing an investment property tho. I am interested on your thoguhts on falling land prices. I use to hang my hat on replacement vale as a sort of intrinsic value to real estate, however the latest shake out made me appreciate how land values can drop below economic replacement / intrinsic value. land prices are a relief valve if you please. I am not clear on my thoughts on all this - they are just my musings to date.
 
yeah musings here as well.

if the perth yields are anything to go by, half the investment's serviceability is met by the owner with after-tax dollars - and that's just the lend cost, add back rates, water, mowmowman etc...

land values are the clincher. if they fall, that's the REAL underlying asset and a true indicator. makes me confused as hell because new builds being sold are nearly comparable to older homes a suburb or two away - when traditionally they command a higher price. so what's going on? are land prices falling or is existing stock holding?

What I find odd is that we're copping this NOW, late 2010, not 2008/09 like we should have. Maybe proof prima facie that the stimulus worked, albeit only for a short period and really just delaying the inevitable...?

anyone saying 2011 is a recovery year is dreaming. i see nothing but more of the same for at least 18 months.

*edit* makes it a buyer's market. maybe now's the time to organise a development - usually takes 24m to get to market......
 
What I find odd is that we're copping this NOW, late 2010, not 2008/09 like we should have. Maybe proof prima facie that the stimulus worked, albeit only for a short period and really just delaying the inevitable...?

anyone saying 2011 is a recovery year is dreaming. i see nothing but more of the same for at least 18 months.

it is interesting. the last 2 years in Perth has seen premium suburbs dropping by up to 40% with middle suburbs ticking up a notch and FHO burbs being blown around in the wind. the weekend property report did nothing to clarify the outlook - the lack of commentary was noticable, and the few that commented were at complete odds with each other... Reiwa saying the outlook remained grim, the land developers saying we are about to hit a land/property boom. I have never seen the outlook so confusing and we can't even look at recent performances as it is such a mish mash of irrational outcomes
 
atually I wonder if the whole market should have dropped 20-40% but the only thing holding up the middle rung was the stimulus and this segment is now getting the inevitable. The stimulus may have created 3 markets within Perth that are all out of kilter now
 
Ausprop, I expect the uncertainty to grow. Property loans are now 40% dependent on foreign credit. IMO, those creditors take their lead for Australian lending from the US and Chinese economies, and less so Europe.

This is an economic and finance climate Australian banks, developers, and property buyers have not encountered before.
 
Ausprop, I expect the uncertainty to grow.

Oh dear. More defeatism and negativity.

Property loans are now 40% dependent on foreign credit.

It wasn't always that way - up to the mid 90s, most property loans were financed within Australia.

This is an economic and finance climate Australian banks, developers, and property buyers have not encountered before.

As always, the world is about to end. The glass is always half empty. The end is nigh. Let's put our faith in conspiracy theorists who will lead us out of the hell we live in.
 
Just wanted to point out that in the context of a govt reaping over $300bn in income every year, a total debt of $56bn is nothing - it's a rounding error.

It's equivalent to having a property that yields $300k in annual rent and total debt of $56k. If that's perceived as being risky then my portfolio should give everyone a heart attack.
 
Just wanted to point out that in the context of a govt reaping over $300bn in income every year, a total debt of $56bn is nothing - it's a rounding error.

It's equivalent to having a property that yields $300k in annual rent and total debt of $56k. If that's perceived as being risky then my portfolio should give everyone a heart attack.

great....it should be a cinch paying it down in 3 years.
 
I noted this post when I didn't log on to the forum and have the ignore feature kick in..

Oh dear. More defeatism and negativity.

It wasn't always that way - up to the mid 90s, most property loans were financed within Australia.

What % of property loans was that Meconium?
Why do you think most property loans are no longer financed domestically?
What % foreign credit can sustainably finance our housing market Meconium?

As always, the world is about to end. The glass is always half empty. The end is nigh. Let's put our faith in conspiracy theorists who will lead us out of the hell we live in.

As always, you dish out over and over, the same school playground parrot repetitive put downs. It is indicative you are incapable of making a more informed counterargument.

Go away and read something that supports an opposing view to mine Meconium, then come back and express your case with all the rationality your education provided.

If you cannot do this, save yourself the stress, and put me on ignore.


 
Just wanted to point out that in the context of a govt reaping over $300bn in income every year, a total debt of $56bn is nothing - it's a rounding error.

It's equivalent to having a property that yields $300k in annual rent and total debt of $56k. If that's perceived as being risky then my portfolio should give everyone a heart attack.

What you want to know is the 'net income'... FY2010 GDP is only $1,200bn
Our total exports were $265bn to August YoY compared with imports of $264bn...

You can't quite quote a 'revenue' line. It's like saying Company X makes $100m revenue but has $150m expenses. As long as Centrelink keeps lazy people prancing around, it'd be like this.
 
That's my current plan minus the borrowings. Have reactivated my international account (been a while since I bought any US stocks) and will start dripping some small cash in each month while our $A is high. Only going for relative blue chips and not using any leverage so it's not going to be a big play, but I'd like to get some exposure.

Really enjoying looking into the US companies. Have started wading into the market with 4 stocks and am drip feeding a bit in each week. So far I've averaged about US$0.99c with my transferred funds.

It's just phenomenal the amount of growth some of these US stocks have ahead of them (I'm talking long term, not risking my money yet on 'hopefuls' trying to double in 6 months). Some of the biggest co's in the world yet they have so much potential growth ahead of them it's not funny. Much more options than the Australian market and many more truly worldwide co's as opposed to the handful we have on the ASX.
 
alot of the growth wil be due to the permanently weaker USD but it's a catch 22 because your investment will be weakening with it
 
True to a point. Guess it depends on which businesses you look at. I'm looking at businesses that are growing regardless of currency movements, including some that have pretty much saturated the domestic market so are focusing heavily on outside markets for future growth with or without a strong/weak $US.

For example one business that currently has 37,000 locations and is looking to likely double that number in the next 20yrs. Sure the US$ decline will have a positive effect as well, but that's huge growth in business regardless of currencies.

Or another one that's US domestic only now (well technically a small presence in UK). Immensely growing consumer demand for their product category and they only have 300 locations at the moment, not even in every state. Let alone once they expand nationally and then internationally. But then I'm happy to go along for the ride for the next 20yrs when others may not. Vast majority of product from local suppliers (that's one of their businesses heavy emphasis) so not a huge amount of currency involvement except for input costs of their suppliers.
 
Currently establishing positions in YUM - Chinese growth and potential is phenomenal, then other sources like TB in US to follow, India etc; MCD - very well run and will always perform well with their proven system and innovative focus, plus still many under penetrated markets; AMZN - yes I know, PE of 70 but I believe internet shopping has huge growth ahead, plus they stand to be a/the market leader in Cloud as one of the first and innovative leaders, but it's still very early days for that call; WFMI - definitely a fast growing market with increasing awareness and demand from consumers, a well run company which also has many systems that remind me of early MCD's such as staff satisfaction, customer focus, strict product quality etc and they're only just beginning with 300 stores, nowhere near country wide yet and virtually only in the US still.

Also been looking at KO (though want to look into their growth prospects more before I take a position), PEP (but the fact that they can't bring increased revenue down to their bottom line over last few years bothers me), PETM (early days, not sure), WMT (I think they still have room to grow in US with smaller 'local' market stores, plus they're only in 12 other countries so far but looking to expand eg. Indonesia, Africa, and CRM (but my preffered exposure to the Cloud is through AMZN so not sure I'll be getting any of these).

Bare in mind I realise many of these have already run hard and some such as AMZN are on high valuations. However I'm looking to establish long term positions for the next 20-30yrs, so not too worried about short term purchases when I intend to DCA over the years. Also looking to set up a margin loan on the portfolio after all now, though very low LVR to keep it safe ie. I'm thining only 20% LVR as it's a long term portfolio and I don't intend on selling.

What about yourself IV? Bought much in the US yet?
 
Currently establishing positions in YUM - Chinese growth and potential is phenomenal, then other sources like TB in US to follow, India etc; MCD - very well run and will always perform well with their proven system and innovative focus, plus still many under penetrated markets; AMZN - yes I know, PE of 70 but I believe internet shopping has huge growth ahead, plus they stand to be a/the market leader in Cloud as one of the first and innovative leaders, but it's still very early days for that call; WFMI - definitely a fast growing market with increasing awareness and demand from consumers, a well run company which also has many systems that remind me of early MCD's such as staff satisfaction, customer focus, strict product quality etc and they're only just beginning with 300 stores, nowhere near country wide yet and virtually only in the US still.

Also been looking at KO (though want to look into their growth prospects more before I take a position), PEP (but the fact that they can't bring increased revenue down to their bottom line over last few years bothers me), PETM (early days, not sure), WMT (I think they still have room to grow in US with smaller 'local' market stores, plus they're only in 12 other countries so far but looking to expand eg. Indonesia, Africa, and CRM (but my preffered exposure to the Cloud is through AMZN so not sure I'll be getting any of these).

Bare in mind I realise many of these have already run hard and some such as AMZN are on high valuations. However I'm looking to establish long term positions for the next 20-30yrs, so not too worried about short term purchases when I intend to DCA over the years. Also looking to set up a margin loan on the portfolio after all now, though very low LVR to keep it safe ie. I'm thining only 20% LVR as it's a long term portfolio and I don't intend on selling.

What about yourself IV? Bought much in the US yet?

Steve

Out of interest how are you making your purchases, through a broker or direct.

Regards
 
Steve

Out of interest how are you making your purchases, through a broker or direct.

Regards

I'm using my CommSec International account. Very easy, call them up to transfer funds into the account (whichever currency you like), goes in that night and you're ready to buy between 2-7am the next morning. :) Not really interested in dealing with a full service broker as I don't really want/need their advice with the strategy I'm undertaking and last time I used them (10+ yrs ago) they wanted I think minimum parcels of $10k etc.

Looked into the direct stock purchase programs which many of the big co's offer in the US as these facilities offer much lower transaction costs, but unfortunately they're only open to US citizens.
 
I'm using my CommSec International account. Very easy, call them up to transfer funds into the account (whichever currency you like), goes in that night and you're ready to buy between 1-7am the next morning. :)

Looked into the direct stock purchase programs as they offer much lower transaction costs, but unfortunately they're only open to US citizens. Not really interested in dealing with a full service broker as I don't really want/need their advice with the strategy I'm undertaking and last time I used them (10+ yrs ago) they wanted I think minimum parcels of $10k etc.

thanks for the info Steve.
I have to say i am very impressed (without having looked at the stocks yet), with your thought process.

Amazon is too expensive for me, but it is fast growing and has a sustainable business model. I think its definately a top quality company that deserves a status as a long term buy and hold stock (but at what entry price???)

Stocks that i currently own are: GE, Oracle, Microsoft, YUM.
Exited cisco and HP, both on losses.
Current US portfolio is roughly break even, the biggest problem i find is when share prices are attractive, AU$ is low. (for example from memory i bought some of the GE at around $11-$12, but when the AU$ was much lower, so effectively its still at break even point).

Like you i am searching for 'long term buy and hold' stocks in the US, rather than investment trading positions via intrinsic value arbitrage. I think the US market is far more efficient than Australia in short term pricing of its stock. Therefore a retail investor's competitive advantage can only come through being patient.

In regards to margin loans the biggest problem is the interest rate differential. Equity valuations are sensitive to interest rates. Using australian sourced margin loans, we are paying AU$ margin rates, yet buying US stocks that are priced reflecting US$ interest rates.

Hey if you are serious about US stocks, maybe set up a new thread in the coffee lounge, this way the information doesnt get lost in the system.
 
....

Looked into the direct stock purchase programs which many of the big co's offer in the US as these facilities offer much lower transaction costs, but unfortunately they're only open to US citizens.

I've got an account in Zecco that allowed me to own us stocks even if I wasn't a US citizen. You just have to fill out couple forms and send it back.

....
Stocks that i currently own are: GE, Oracle, Microsoft, YUM.

YUM is one of Warrent Buffet's favorites :). I'd bought ORCL @ 9 long ago and had to sell it :-(

Own also BIDZ (sucker), RIMM, V (love this one), AAPL (love it too), BAIDU etc..

now looking at KO for its competitive advantage and relatively low P/E. have to do more research before making the move.

....
Like you i am searching for 'long term buy and hold' stocks in the US, rather than investment trading positions via intrinsic value arbitrage. I think the US market is far more efficient than Australia in short term pricing of its stock.

What I love about US stocks is the wealth of information you can get. I just can't get my head around with AUS stocks, apart from the normal BHP, woolies, etc.
 
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