Recession? Time to bring all my USD and Chinese yuan back and buy AUD at 40c, although I'm pretty happy at 83c already.
What happens during a recession????
- Thread starter ww2_nut
- Start date
Delta
I posted this today and agree, but am waiting till the Au$ falls back to 70
predictions are next year 72
Australian Dollar:
The Australian Dollar plunged below 0.83 during trade on Friday as US labour market data shocked investors adding nearly 100,000 more new jobs than anticipated throughout November. Friday?s Non-Farm Payroll report showed some 321,000 jobs were added highlighting the strength of economic recovery throughout the US and adding support to calls for the Fed to adjust interest rates as early as July next year. The Aussie now trades at fresh 4 year lows having moved comfortably through what was seen to be key support levels at 0.8320 as attentions now turn to Chinese Trade balance Monday and NAB business confidence Tuesday for directional impetus into the start of the week.
I posted this today and agree, but am waiting till the Au$ falls back to 70
predictions are next year 72Australian Dollar:
The Australian Dollar plunged below 0.83 during trade on Friday as US labour market data shocked investors adding nearly 100,000 more new jobs than anticipated throughout November. Friday?s Non-Farm Payroll report showed some 321,000 jobs were added highlighting the strength of economic recovery throughout the US and adding support to calls for the Fed to adjust interest rates as early as July next year. The Aussie now trades at fresh 4 year lows having moved comfortably through what was seen to be key support levels at 0.8320 as attentions now turn to Chinese Trade balance Monday and NAB business confidence Tuesday for directional impetus into the start of the week.
Personally, I think if one had that mindset of 'it can always stop at any moment' whilst investing, its unlikely they will achieve any great mount of wealth, IMHO. yes, yes I know 1 or 2 ppl might get lucky and still create great wealth with those beliefs, but for the rest of investors, I don't think it would happen. Personally I believe there is a big difference between savvy-based investing and fear-based investing. The destination where you end up can be night and day.
Cheers
leo
I think there's also cautious investing . We've geared up heavily on two occasions and on both occasions started cashing out well before what we thought was the peak . Our previous sell off enabled us to be cash buyers when the GFC hit and our recent sale put us to a much stronger position , so if we want we can make further purchases out side Sydney without overexposing our selves.
Cliff
Hi cliff,
I think what you did can and does work. Selling at the right time (although I don't agree largely to selling) but I know it works at times. There are also risks to selling and not being able to used the profit to maximise further equity gains.
But well done its obviously worked for you! Awesome. Personally I wouldn't recommend it as a general strategy to sell off when one thinks they are at the peak. Just my opinion and what works for one wont for others I agree.
What I strong disagree with however is to have the belief that ' it can always stop at any moment' while investing. Just my opinion.
Well done to you though!
cheers
leo
Leo,
Just curious as an investor how many boom/bust cycles have you actually been buying into??
MTR
Leo,
Just curious as an investor how many boom/bust cycles have you actually been buying into??
MTR
HI MTR,
Ive been though a few mate. Because I don't only invest in one state. So as u know different states/suburbs/areas have different cycles at same time. Its not my first rodeo of a cycle, that's for sure
The problem is ppl can and do get into trouble at 2,3,4,5,6 o clock of a cycle if they didn't properly (and there is a lot involved in 'properly' IMHO) buy at the 6,7,8,9, (perhaps 10) of a cycle IMO.Leo
Not a good example. The area around Epping station has been rezoned from a 3 storey to a 27+ storey against the bulk of the community wishes so of course certain properties have exceeded their previous worth.
It certainly didn't stop us...we went gung ho for 6 years and amassed all the properties we wanted.
But just because you don't want to believe a recession/depression is coming...just doesn't make it true.
Leo
When we go from boom/bust cycle the risk is that in the downturn/bust cycle investors will be stuck with stock that goes backwards. In other words no growth and it could take 7-10 years before it starts to get back to its original price and starts rising. Not only this but in the main investors will be feeding the debt monster because they are holding negatively geared property.
Another major risk in downturns is the loan may become greater than the value of the property, therefore they can not sell, they are stuck.
For example we had a downturn in Sydney, Perth, Brisbane, Melb (as much as 7 years) - markets all started rising about 2-3 years ago, however prior to this they went backwards depending on the area/location.
My point is SChange's strategy is very smart because he gets in when the market is rising and bails prior to it peaking, he is maximising his returns and finding other opportunities/markets to play in and reducing his risk/debt. Perhaps holding 50% of the stock, this makes sense.
When you have been through many cycles then the idea/notion of holding properties forever sounds great in theory but don't try it at home unless you have your bases covered.
MTR
When we go from boom/bust cycle the risk is that in the downturn/bust cycle investors will be stuck with stock that goes backwards. In other words no growth and it could take 7-10 years before it starts to get back to its original price and starts rising. Not only this but in the main investors will be feeding the debt monster because they are holding negatively geared property.
Another major risk in downturns is the loan may become greater than the value of the property, therefore they can not sell, they are stuck.
For example we had a downturn in Sydney, Perth, Brisbane, Melb (as much as 7 years) - markets all started rising about 2-3 years ago, however prior to this they went backwards depending on the area/location.
My point is SChange's strategy is very smart because he gets in when the market is rising and bails prior to it peaking, he is maximising his returns and finding other opportunities/markets to play in and reducing his risk/debt. Perhaps holding 50% of the stock, this makes sense.
When you have been through many cycles then the idea/notion of holding properties forever sounds great in theory but don't try it at home unless you have your bases covered.
MTR
Kathryn
I think it also helped that you were purchasing cash flow properties from day 1, am I right? Huge one
Leo
When we go from boom/bust cycle the risk is that in the downturn/bust cycle investors will be stuck with stock that goes backwards. In other words no growth and it could take 7-10 years before it starts to get back to its original price and starts rising. Precisely why its crucial to buy under intrinsic value AND have scope to add value. You made my point for me even clearer.
Not only this but in the main investors will be feeding the debt monster because they are holding negatively geared property. Again, if a portfolio is property built, then the investor needs to understand the importance of a balanced portfolio, fixed loans, buffers etc. This is part of the 'properly' investing.
Another major risk in downturns is the loan may become greater than the value of the property, therefore they can not sell, they are stuck. Again, buying under intrinsic price and adding value will reduce the chance of this. Of course there is risk in investing, but this mitigates a lot of that risk.
For example we had a downturn in Sydney, Perth, Brisbane, Melb (as much as 7 years) - markets all started rising about 2-3 years ago, however prior to this they went backwards depending on the area/location. I have said before many times and I say again, its so important to buy something that you can add value to, that's fits in your portfolio and balances the cash flow situation. And bought below market value. All these factors will greatly reduce risk on every front IMO.
My point is SChange's strategy is very smart because he gets in when the market is rising and bails prior to it peaking, he is maximising his returns and finding other opportunities/markets to play in and reducing his risk/debt. Perhaps holding 50% of the stock, this makes sense. I agree that he has done well and I told him so in the thread. I have no problems with his strategy, I just wouldn't recommend it to everyone. See change is not the 'average' investor by a long shot, I have spoken to him and hes massive on the 'adding value' and buying below market value front .
When you have been through many cycles then the idea/notion of holding properties forever sounds great in theory but don't try it at home unless you have your bases covered. MTR IMHO the problems start to arise when a portfolio is not built property, from the ground upwards. Cash flow needs to balanced, certain loans needs to be fixed, each purchase needs to be bought under market value, scop to add value, in the right demographical area etc IMO. Very few ppl approach it this way from the beginning, and that's why problems will come later on IMO.
Cheers
leo
MTR
Yes well done to you Kathryn, awesome result!
with regards to a recession/depression, maybe it will, maybe it wont. I don't know, and to be honest its not overly important to me.
leo
HI MTR,
Ive been though a few mate. Because I don't only invest in one state. So as u know different states/suburbs/areas have different cycles at same time. Its not my first rodeo of a cycle, that's for sure
Leo
Hi Leo
While you may consider investing in different places at relatively close time frames as going though different cycles , I'd probably disagree with you .
The big variables are the economic / financial ones and those are generally Australian wide and these tend to have a greater variation , rather than state to state . In the last cycle , we had a PPOR and commercial property in Sydney , and investments in Logan , rocky , Townsville and Hobart and all of those investments followed a similar pattern .
This cycle has been different , in particular in Sydney to last one .
Cliff
mate at the moment, there is someone in the chartroom pretending to be you!! talked to me for 20 mins! I am massively annoyed!! I am contemplating leaving this place.
Leo
Leo
Buying at the right price/under market value, developing, cashflow + etc. are great strategies, however its impossible to know how far a market will fall in a bust cycle regardless. There are no guarantees not even with blue chip (another myth), when the market crashes we can and have seen falls of up to 40% in Australia.
If you are mitigating the risk with strategies mentioned, great, however, I would not disregard ever selling as another strategy to move forward and reduce debt. I have learnt the hard way, from experience.
MTR
Buying at the right price/under market value, developing, cashflow + etc. are great strategies, however its impossible to know how far a market will fall in a bust cycle regardless. There are no guarantees not even with blue chip (another myth), when the market crashes we can and have seen falls of up to 40% in Australia.
If you are mitigating the risk with strategies mentioned, great, however, I would not disregard ever selling as another strategy to move forward and reduce debt. I have learnt the hard way, from experience.
MTR
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Kathryn
I think it also helped that you were purchasing cash flow properties from day 1, am I right? Huge one
True...but depending on how big or how long a recession / depression lasts, unless you own your properties outright, there would be a lot of pain.
If I can break even + $1.00 leftover ...I can live with that.
Sounds exactly like you?re quoting from a rich dad poor dad book.
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