Shares down - property up?

[Lotana]

Would it be reasonable to assume that when the times are turbulent on the share market. The smart money would move to a safer investment classes such as property?

I think residential property prices, which were stagnant in most areas for the last 6 months, would start moving again and here are my reasons:

1. Share market investments are in trouble.
2. After the war in Iraq there will be more refugees coming to all sort of countries including Australia => more housing demand.
3. Australia is remote from the Middle East and is considered as one of the safest western countries in the world => more foreigners buying residential property in aus.
4. Interest rates are still low and there is no talk they will go up in near future.

Am I missing something?

Regards,

Lotana

 

[Pele]

Gday

Dont mean to be argumentative but i disagree with alot of your comments. The stockmarket has been going nowhere for close to 3 years. Its cyclical(just like property) and i beleive that values are getting very low for many big companies. My opinion is that say $1m invested in blue chip stocks would outperform a $1m investment in Sydney property over the next 5 to 10 years. Australia might have a few more boat people but they will be poor as chuch mice and will go on housing commission waiting lists if they get to stay here. Interest rates are very low and while they should be steady for a year or so, when they do move it would be very surprising if they went down. Yields are very low from property and when people see blue chip stock yields overtaking them the money will jump ship. Its just my opinion.

Pele.

 

[see_change]

Have to agree with Pele

My perception is that the smart money moved into property awhile ago and is now looking at moving back into shares.

Robert Kiyosaki was quoted saying so in an article on the weekend.

See change

 

[bridie]

Hi See Change,
Could you let us know where you saw the RK article?
cheers
Bridie

 

[brains]

Pele

I believe that company dividends have already overtaken gross rental yields . (In Sydney & Melbourne)

I read somehwhere that average gross rental yield in Sydney is 3.5%, pathetic. And i reckon growth will be pretty ordinary for the next few years.

Yes the smart money would be moving toward the stockmarket.

 

[geoffw]

Originally posted by brains
Pele

I believe that company dividends have already overtaken gross rental yields . (In Sydney & Melbourne)

I read somehwhere that average gross rental yield in Sydney is 3.5%, pathetic. And i reckon growth will be pretty ordinary for the next few years.

Yes the smart money would be moving toward the stockmarket.

Perhaps pathetic by itself- but if there is growth, that makes it heaps better. Even if that growth is ordinary, if there is growth, that makes it somewhat better.

Smart money is unpredicatable. Well, that's my predicition.

 

[suggo]

Aren't we suppose to be the 'smart money'? (well maybe not me but I think some of you guys definately qualify!)

So where is everyone here going with their money?

BTW, if you guys aren't, then who is the smart money?

 

[Glenn]

Jeez,

I hope you guys are right about the sharemarket starting to look tasty to the smart money, my managed funds have copped it in the Kyber for the last 2 years even though I have been contributing monthly for the last 3.

Chicken Little can rattle even the most bullish when she chirps for long enough in your ear.

My advisor was trying to "talk up the market" last week during a short discussion but I have trouble believing that the share market will start to sustainably rise for at least another 3 years...my reasoning being that the value of quality shares move up with increases in their sales.

One thing I have noticed though...there is an abundance of work in Australia if you are prepared to do anything to get a dollar.

Glenn

 

[bundy1964]

Just my thoughts

Property and shares both cycle with the idea to buy low and sell high

Most people tend to buy at the top of the market and sell in a falling market. Not smart but human nature

Gearing level is properties main advantage. Shares will gear at 60% on normal loans and property at 80% to 110%. While share may grow at a higher rate longterm property lets you get the growth on other peoples money Shares can be geared 100% if you use property LOC ect to do it. Share gearing is more risky than property IMHO

How often you get the hard cold cash in your hand is another factor weekly or monthly is a lot easier to budget than twice a year.

If you can't pick the market then time in the market should be your aim. Are shares at the bottom? Has property hit the heights? I can only guess

bundy

 

[Alan H]

I'd be cautiously leaning more towards increasing Share Investment at the moment too.

Personally I think the poor performing stockmarket has been what has already kept the property boom going for much longer than expected. I thought Sydney Property would have peaked 1 1/2 years ago but 'something' just kept it going and going. Money from exited Sharemarket? If so, it has had that advantage for quite a while now. Something has to give.

One question though .........is the current stockmarket 'cheap' or has it just fallen quite a bit? As at December the average Price/Earnings Ratio for All Ordinaries companies stood at 27.38......not exactly low if you look at the last 7 or 8 years. Mind you, there would appear to be some good quality 'blue chips' out there trading far below that average.

As always, both property and shares have different advantages so, if an interest is there in both areas, a 'fluid' mixture seems a sensible approach.

 

[manny]

Well it looks like the tide has turned...

A few years back if you got into a taxi, the taxi driver would talk to you about shares & basically everyone was a stock market expert...

Well I went on a 3 day course last week, needing to get a taxi to & from the venue daily... funny enough most taxi drivers were speaking as if they were "IP experts", talking up IP investment, etc... which reminded me of the share-market phase...

Although my opinion is that there is still money to be made in IP investing, the only difference is that opportunities will need to be made & more creative thinking/tacticts may need to be employed...

The stock market has been flat for the last few years, being cyclical, it is bound to bounce back, but once again you need to do your research/due dilligence (projected earnings, financials, etc.) on the companies you intend to invest in...

Cheers,

MannyB.

 

[see_change]

Article on RK was in either Sydneys Sunday telegraph or Sunherald. It was talking about his latest book , Rich Dad Prophecy

BTW I think that collectively , the opinions on this forum do represent the smart money .... well some of them. It's been interesting watching the actions of members over the last two years and then watching the masses follow at later stages.

My prophecy is that the market will continue to be uncertain untill some decisive action is taken concerning Iraq. Recent lows in the markets have been triggered by fairly major events , 911 and the enron and associated collapse. There maybe another low associated with Iraq , but wars have historically been good for the share market.

Why ? Because the markets hate uncertainty. The market is already factoring in the possibility of rises in oil prices and other destabilising factors that war could bring. Once something happens it will bring a sense of direction and the market may pick up.

Please don't interpret this as me thinking a war will be a good thing. While normally a John Howard fan , I'm disillusioned with the way they are backing up the seeming willingness of the US to go in without the support of the UN.

see change

 

[JumJones]

hmmmm

<insert cat among pidgeons>

The thing is, you are not just putting $1M into the share market or into property. You are operating in an environment where you are in control, you make the decisions, you value add.

People that understand the sharemarket can make money whether it falls, rises or stays absolutely flat-as a tack stagnant.

People that understand property can do the same ... whether it be by capital appreciation, wraps, renos, lease options, commercial, holiday, blah blah blah. Thats right, if house prices are falling, you can still make money.

If you dont understand what you are doing, or even worse if you dont understand why you are doing, then its probably a good time to edumacate yourself.

You can always make money with either investment vehicle in any given environment. There are some fundamental differences of course, shares are more liquid and its easier to shift your position. With property it aint so easy, but I dont think wrappers would cry if houses took a price fall. (I dont wrap btw).

If you want to be safe, consider bonds or other money market products, save 10-20% of your income, and enjoy the rest.

 

[XBenX]

dont forget the reasons why we are all here....

1/. the benefits of gearing and higher cash on cash returns whihc the property market provides

2/. the fact that property presents a lower risk

im over simplying things so usual disclaimers, ceteris paribus, etc

 

[Lotana]

True,

But shares provide better liquidity and low transaction cost. They generally require less involvement from those time-poor chaps.

Use equity in IP to buy shares which pay dividends that can be put towards a deposit for you next IP. Diversify!

Real life examples of how diversification works:

1. I hold shares in 2 listed property trusts with assets in the United States, shopping centres and office buildings in major cities. I am planning a business trip to the states for a couple of weeks to inspect properties I partly own through the trusts. The expenses should be mostly tax deductible.

2. My wife and I are going to Melbourne for three days on Valentine's Day staying in a nice romantic hotel. It just coincided with an AGM of one of the companies we partly own, so we'll attend the AGM, and the next day we'll inspect our IP in Melbourne. All travel, accommodation, and meals expenses shall be tax deductible.

Cheers,

Lotana

 

[brains]

I think you need to proportion your private and business expenses for your trips for tax deduction purposes. Keep a diary of your trip and use that with your accountant to ratio the relevant expenses. Im no accountant so im open to correction but thats what ive had to do in the past.

 

[Lotana]

Brains,

You are correct. For the US trip there will be almost 100% deductibility because I have something to inspect for each day at each place of stay. The Melbourne trip will be 100% deductible because we'll stay for 2 nights attending the AGM on Friday, inspecting the IP on Saturday, departing on Sunday. No private time at all. If I had only the shares or the IP this would not be possible.

Regards,

Lotana

 

[brains]

Good work son