Shares - what's the best hedge against the Australian RE market?

[jerrybee]

Someone made a good point in the equities thread that banks would not be a good place to invest if you wanted to balance things out since they are so intertwined with RE. Mining, even if it was still doing well, would be also be doubling down on the same thing basically, since it underpins so much of our current strength. So if a conservative, primarily RE investor were to invest in equities, what would be the industries to hone in on? What are the major events that would serve to undermine the RE market and what type of industries would do well if this were to happen?

Currently I have some Japanese ADR's in the U.S., so this is my hedge. The rising USD against the Yen pushes up the shares because it's an export driven company / economy, while the rising USD against the AUD pushes it up again when I decide to cash in. It's like a double whammy. In curious what other strategies are out there.

 

[OttovonB]

Collection House - CLH

 

[jerrybee]

Collection House - CLH

LOL too true

 

[willair]

Someone made a good point in the equities thread that banks would not be a good place to invest if you wanted to balance things out since they are so intertwined with RE. Mining, even if it was still doing well, would be also be doubling down on the same thing basically, since it underpins so much of our current strength. So if a conservative, primarily RE investor were to invest in equities, what would be the industries to hone in on? What are the major events that would serve to undermine the RE market and what type of industries would do well if this were to happen?

Currently I have some Japanese ADR's in the U.S., so this is my hedge. The rising USD against the Yen pushes up the shares because it's an export driven company / economy, while the rising USD against the AUD pushes it up again when I decide to cash in. It's like a double whammy. In curious what other strategies are out there.

There are enough social networks out there that have investor information about what people like to invest in,i know several people that bought into "CBA" just prior too the "GFC" at just below $$60.00, and it did not take long for that investment to go below the 30$$ mark and lower,so yes Banks do carry explosive consequences "IF" you sell when everyone is running for the back door,plus I have seen property go down in value over 50% during the early mid 1990's,same story you only suffer if you sell,.

The big trigger is look at what happened when the rates went this low,and what will happen when they will go up again,myself I don't intend to sell one unit in any Banks I have invested in..

 

[keithj]

Someone made a good point in the equities thread that banks would not be a good place to invest if you wanted to balance things out since they are so intertwined with RE.

Short the banks.

Mining, even if it was still doing well, would be also be doubling down on the same thing basically, since it underpins so much of our current strength.

Short the miners.

 

[HiEquity]

Just wanted to point out that if you hedge every risk you will never make any money!

 

[jerrybee]

Just wanted to point out that if you hedge every risk you will never make any money!

I know. And I'm not trying to do that. I have a ton of money in RE and I've maxed myself out, and only have a few hundred K left to play with. So it's not a huge hedge, just placing a small portion of my eggs in a different basket

 

[HiEquity]

As Keith suggested you could just short but it's hard to invest in a short - it's more of a short term thing - small bet with a big payoff that's unlikely to come through.

If you need to buy something, then the gold bugs seem to think that asset acts as a hedge. Personally I see no intrinsic value in a bunch of coloured metal that doesn't provide any income but others seem to differ.

Other than that, alcohol and prostitution apparently do well in recessions I've heard?

 

[sanj]

I know. And I'm not trying to do that. I have a ton of money in RE and I've maxed myself out, and only have a few hundred K left to play with. So it's not a huge hedge, just placing a small portion of my eggs in a different basket

If you're open to taking bigger risks I've noticed that in the last few months there have been a lot of businesses needing funds to expand, be it via equity stakes or Short term project funding. Returns can be pretry good. A friend recently invested in an event coming up with a good operator and history, should see 70% Profit minimum based on reasonable projections up to 120%, potential loss capped at 20%.

This is over 3 months and backed by personal guarantees.

There are a lot of people out there in similar need for funding, main thing is finding them and separating the duds from the gems

 

[turk]

Are you looking to hedge or diversify?

 

[sanj]

As Keith suggested you could just short but it's hard to invest in a short - it's more of a short term thing - small bet with a big payoff that's unlikely to come through.

If you need to buy something, then the gold bugs seem to think that asset acts as a hedge. Personally I see no intrinsic value in a bunch of coloured metal that doesn't provide any income but others seem to differ.

Other than that, alcohol and prostitution apparently do well in recessions I've heard?

Atm alcohol spends and general hospitality spends are dropping sonewhat significantly in perth. Still lots of places doing well but people are definitely spending less money

 

[hobo-jo]

Just wanted to point out that if you hedge every risk you will never make any money!

Depends how you hedge I guess... if you are heavily invested in an asset class, but fear the risk of a severe downturn in the short term then you can hedge with a small outlay (e.g. buy some put options).

 

[HiEquity]

Depends how you hedge I guess... if you are heavily invested in an asset class, but fear the risk of a severe downturn in the short term then you can hedge with a small outlay (e.g. buy some put options).

Yes but that's only a small hedge for a finite period of time, which could be an entirely worthwhile strategy of course. My wider point was that to make money you still have to take some real risk. And being out of the market is an opportunity risk by itself, which could make money for someone if prices go against the trend.

 

[Phiber]

What about exposure to international markets?
Not specifically a hedge agains Aus RE, but more a diversification play.
Also, if RE was to crash for some reason, it would surely affect the AUD and if you had exposure to an unhedged international share basket (like VGS), then you would benefit from the falling AUD and effectively hedged against the potential for the depreciating currency.

Thoughts?

 

[lazibones]

I would agree with CLH and VGS but possibly prefer IXI, iShares Global Consumer Staples ETF to VGS.

 

[Deltaberry]

Evolution Mining