Where to invest?

[Intrinsic_Value]

I spend hours every week filtering through Australian stocks. Then we have another group that represents 'potential value', but that is based on current information. What happens if future profit drops or drops more than currently expected, those 'potential value' stocks will become value traps (at least in the medium term).

All these positions are not set in stone.

I will try my best to adapt as circumstances update themselves. This is not the time to be an ostrich and stick ones head in the sand. Its the time to have flexible investment strategies.

and in the last several days we have seen exactly this risk about 'potential value' based on current information that is subsequently 'updated' with new information that highlights a value trap based on the previous information.

ie the RETAIL SECTOR.

For those without margin debt and happy to hold for 10 years, there is plenty of time to look through the cycle (so long as the individual players survive through the cycle).

I dont have much exposure to this sector (but i do hold a reasonable holding of MYR at an average of around $2.10 (higher cost base but bought just prior to their last dividend, which reduced the cost base, ie if you buy just prior to the dividend then really you subtract the dividend declared from the cost base).

Based on information over the last several days i am nervous.

More so, i do have a heavy exposure to media( i own SWM, APN, SXJ), coudnt hold onto FXJ (at a loss), and have reduced exposure to APN on a loss.

Testing times for intrinsic_value

 

[Intrinsic_Value]

working on a risk strategy based on AU$.

Regardless of Evands comments regarding the government, i think there is significant inherent risk, that isnt appreciated by many people. I have talked about this somewhere in this forum, our economy is not ment to opperate at such high levels of currency translation.

Evand's favourate treasurer Wayne Swan, might be expressing outrage over a media article highlighting a risk to the jobs market. Yet to me this posses a very very real risk.

http://www.heraldsun.com.au/news/mo...of-a-jobs-crisis/story-fn7x8me2-1226228053309

Debate your politics all you like boys and girls, my objective is to make money.

Why the risk????
because a currency represents international purchasing power. If a country has a 'strong currency', then they need an efficient 'business process' to justify that high currency. Australia definately doesnt have this. Its more a case of being in the right place and the right time (ie China wants our resources, with constraints on supply they are paying top dollar for CURRENT supply vs CURRENT demand).

Interesting times ahead.

 

[Aaron_C]

The article has some very good points. We just need to see what is happening to the big retail stocks on the ASX. JBH, HVN, MYR, DJS, BBG, KMD all down massively this month. Half of them have made a profit downgrade....of course people in retail are going to lose their jobs! What other conclusion can possibly be reached?

 

[Indifference]

......
Don't want to put it into gold, as can't get a dividend off gold on which to live on - or use for further investment.

Is it cash in bank at 6%.

........

Yeah so true hey ...especially in these perfect economic times with nothing going, and whilst the investor is a bit unsure in about risk etc in other investment classes, (as the OP said they were )what sort of idiot would consider parkign their money in somethign pretty stable like a bank account that returns 6% ? must be a pretty big idiot to even think of such a dumb thing

I really don't want to offend or sound condescending here (honestly), but there seems to be a fundamental lack of understanding of how currency and the money system works in general terms. A few references to cash in bank at 6% have been made in this thread now & I am completely horrified that anyone would view this as better than say... gold for instance, which only has a ~16.5% value increase in $ terms, year to date. Not to mention the past decade....or the strong fundamentals going forward due to current economic conditions. Maybe I need to be re-schooled in math?

Surely people understand that every time the government expands the currency (monetary base) they are debasing that currency? So when the government "prints" their way out of debt, they are actually indirectly indebting the taxpayer by devaluing the currency whilst concurrently committing to a future taxpayer liability through the debt itself.....

The purchasing power of currency (cash) only goes one way year-on-year... down. The purchasing power of "money" (gold) fluctuates year-on-year... it goes up & down, not just down. More importantly, its purchasing power is preserved (or fluctuates about a mean value) Over the average lifetime, gold always outperforms cash and provides a mechanism to preserve purchasing power.

Now, before I get shot down as a gold bug, I will be the first to acknowledge that the volatility in its $ denominated value can make or lose fortunes, but for the seasoned investor that has a longterm outlook, it has prevailed throughout the ages.

With the current economic conditions & currency issues, I can not comprehend how cash can be seen as a safe haven. Sure, you need some cash on hand during uncertain times but significant holdings seem completely illogical.

 

[tom32]

Now, before I get shot down as a gold bug, I will be the first to acknowledge that the volatility in its $ denominated value can make or lose fortunes, but for the seasoned investor that has a longterm outlook, it has prevailed throughout the ages.

(

I would not say it has prevailed.

It has maintained its value with some notable exceptions which is why one should invest in it.

When people stat viewing it as a profit making investment it starts to worry me... We have 1000 years of precedent to tell us, it is a wealth storage vehicle not an investment one unless you trade it from day to day or think interest rates are heading below the inflation rate. Then you can mortgage up and buy as much as you can!

I suspect many here can do the maths but like with anything, you don't buy something just because it has had a good run last year, or last decade, you buy something because you think it will have a good run next year or for the next decade.

All that said in my opinion whih is not based on any real fundamental reasoning gold for Australians is OK because our currency will lose more ground than gold will if things slow down globally.

 

[jaycee]

I really don't want to offend or sound condescending here (honestly), but there seems to be a fundamental lack of understanding of how currency and the money system works in general terms. A few references to cash in bank at 6% have been made in this thread now & I am completely horrified that anyone would view this as better than say... gold for instance, which only has a ~16.5% value increase in $ terms, year to date. Not to mention the past decade....or the strong fundamentals going forward due to current economic conditions. Maybe I need to be re-schooled in math?

Surely people understand that every time the government expands the currency (monetary base) they are debasing that currency? So when the government "prints" their way out of debt, they are actually indirectly indebting the taxpayer by devaluing the currency whilst concurrently committing to a future taxpayer liability through the debt itself.....

The purchasing power of currency (cash) only goes one way year-on-year... down. The purchasing power of "money" (gold) fluctuates year-on-year... it goes up & down, not just down. More importantly, its purchasing power is preserved (or fluctuates about a mean value) Over the average lifetime, gold always outperforms cash and provides a mechanism to preserve purchasing power.

Now, before I get shot down as a gold bug, I will be the first to acknowledge that the volatility in its $ denominated value can make or lose fortunes, but for the seasoned investor that has a longterm outlook, it has prevailed throughout the ages.

With the current economic conditions & currency issues, I can not comprehend how cash can be seen as a safe haven. Sure, you need some cash on hand during uncertain times but significant holdings seem completely illogical.

That would apply to me and hopefully a lot of other people (I hate being alone), does it really surprise you as much as you suggest ?

 

[jingo]

Well Lizzie, we are a decade ahead of you and are in the serious wind-down to retirement within the next 12-18 months.

We have one IP left, mainly because it is in an area we MIGHT want to move to and we really don't want to make a decision yet. Just signed another 12 months lease to the tenant so that defers any decision for another year. It is basically neutral in cash flow and gearing.

Most money tied up in cash/bond units of superannuation, some direct shares, and a fair chunk stashed in the bank at 6.35% interest. I am in a defined benefit fund so my super is relative to salary.

For the moment we are not looking for much growth, we are more concerned with protecting capital. I guess we are sitting on the sidelines watching what unfolds.

Over the years both property and the share market have been very kind to us.

Property is sluggish, shares are bouncing around, the Aussie $ fluctuates wildly. I guess we are not young enough for the roller coaster ride at the moment.
Marg

Hi Marg,

I always enjoy reading your posts as they are informative. I would like to hear more of your story as, from reading your posts, it seems as though you have a balanced approach to investing.

Without going into too many details, have you essentially sold down your ip's to move into income producing assets like shares and term deposits etc?

Super seems to be a key ingredient in your retirement plan as well.

I think moving into more income producing assets is wise - it is difficult to produce an adequate and effective income stream purely from residential property - unless you have held it for a very long time. Have you found this?

Regards Jason.