Safe places to park money?

[bitingmidge]

Here is an example for you of the same thought pattern - you own a investment house for $200,000 getting $240 per week rent or 6.24% return on the investment/value - in a couple of years when the value of the house is $100,000 are you going to tell me you are getting a 12.48% return on your investment.

Sorry but accountants are aware of the calculations .

Well no I'm not going to tell you I'm getting 12.48%, because I'm probably getting more like 50% if you take into account my equity and you allow for capital gain.

Like most who have rental property, I have it for the long term and prices will fluctuate. If you are buying for the short term, and playing it as you suggest, then there's an awful lot of speculation involved!

If, in a couple of years the value of housing across the board has halved (which is beyond the scope of even the most pessimistic forecaster), I'll have a small wager, that you'll still be doing better than having your money in the bank at 0.5%!

Cheers,

P

[Calm]

.................
Right now the Sharemarket is looking very good for future gains. Not so the Real Estate market. So far as the sharemarket goes I think it is an OK time to just be on the sideline and looking for a good opportunity. There will be many there. It might make a lot of sense to run a ruler over things like Fortesque, BHP Billiton and Rio as well as the big four banks, would be shy of the Penny Dreadfuls right now but I think top companies like Wesfarmers have taken a hit and might be good value right now.
...............................
Making assumptions about the market and what it will do is always risky. Right now I would think a prudent investor would have plenty of cash. So far as the market I don't think it is much of a time to be getting out of Real Estate or Shares. I do think it might be a very good time to be getting into shares but a bad time to get into Real Estate.

Studley

Studley you have an opinion/assumption that shares are going to improve , i say the information i have seen shows that shares may only be halfway down. I have made an assumption on the information i have seen and the behaviour of the government. Do you think if this is as bad as it gets the government would be throwing money around to get people spending or planning billions in infrastructure projects - Dont worry Kevin07 knows it is getting a lot worse yet.

If i am right buying shares now means you are still going to take a hit before they start improving. The point i am trying to make is park your money for at least 12 months. Then go for the shares they should be on there way up or closer to it. Buying now means that when they go down you are still going backwards whereas my suggestion has a better chance of keeping the value of your investment moving upwards. Real estate is going to be a lot slower than shares to react, probably by as much as 5 years. history shows this.

Guess it depends on how you evaluate the information available.

Cheers

[Studley 2436]

Pretty much agree with you David. The only difference being that you think it the market is all down for the next 12 months and I don't think it is clear. Something important is that the market on average might go down while individual stocks are going up. So a smart investor who is wary enough to spread his risks can find gains while the market falls.

I think it is a good time to be watching and looking for opportunities. There will be some that even if they fall this next 12 months will come back strong on the next rise which will come.

Studley

[bitingmidge]

One of the odd things I've seen of late was that charity food queues are seeing large increases in demand.

Given that there's been no appreciable hike in unemployment, there must be an awful lot of people who've lost their shirts on the stock market! It's very very strange indeed, specially the way they drive up in their new HSV's!

Another case of appalling reporting practices methinks, like the TV station doing the rounds of the real estate auctions yesterday and gasping at low clearance rates and prices. Where have they been for the last twelve months?

Cheers,

P

[Metal Head]

There must be an awful lot of people who've lost their shirts on the stock market!
Cheers P

Yes we have one across the road - Andre Agassi

However I think it was mainly due to eating too many tennis balls if you ask me!!

Regards
MH

[Metal Head]

Hi,

On a more serious note. We had 4 houses sold in our street about 4/5 months ago which developers had bought (as the houses were bulldozed to make way for new dwellings).

However, only one is having units (2) built on it presently, whilst the other 3 are being sold via estate agents. Maybe the developers/builders have too much work on presently or more likely they need the funds for other things

Regards
MH

[Toolin Around]

Some have forgotten the title to the thread - a safe place to park money.

Banks are obviously the worst investment but they are now a safe place to sit and watch things unfold when you're in a situation somilar to mine- one where the cash is very mobile and in an easily accessable state. The banks are just that.

Many are yelling to BUY BUY BUY right now. But I'm a patient non-gambler. I will wait and watch how the picture unfolds. If I see what I believe is a good opportunity I will act on it. But I need to have a clear picture first - something no one has right now.

Maybe I won't make bucket loads at this very moment cause I won't gamble but I won't lose either - there's two side to every coin. I'm also a lousy poker player. Only ever bet when I had something worth betting on. So when I bet everyone usually went out.

Some here think I'm in a panic - wrong. I simply saw serious problems that were founded on what is transpiring now and what has happened historically and wanted to make sure what I have stays mine. Up till a few days ago I viewed the banks here as a liability compard to other banks around the world - now they're all on a level playng field so there's no reason to move.

[Toolin Around]

It sounds like you've already made up your mind so I suppose it's useless trying to tell you otherwise.

Trade is not necessary, unles YOU buy into the globalisation nonesense. The fact is countries, villages, individuals have existed quite happily throughout history without trade. Trade is nice, like ice cream, but neither is essential.

Approximately 1/3 of china's gdp is exports. Coal and iron ore were about 55/tonne in 2000, they are now 150/tonne. They won't increase 30% a year anymore but we ain't going back to 50/t either.


Edit: Probably the biggest thing that is different for us is not our links with china but our lack of government debt. The importance of this cannot be overestimated.

I can't speak for anyone else but I read very carefully what is said. Of course I believe what I do. I can't understand why I wouldn't... I offer up what i say because I look for input from others and change what is wrong in what i believe. It just so happens though that what people are saying about China and India aren't compelling enough to me to change my mind at this time.

I suspect China has lost much more than 1/3 of their exports and are going to tighten up as a result - that's human nature. Everyone that says they're going to punch on unabated is at best guessing. And because the world is in uncharted waters their guesses aren't even educated guesses anymore.

Your last comment is for me the most compelling in that Aus has been fairly frugal and has a very low debt. The masses rage against it in the good times and thank god for it in the bad times.

[namtrak]

The amount of voodoo guessnomics going on at the moment is amazing (not so much this discussion) - but the number of people I sit down with, who have an opinion on the current economic crisis which is largely based on a headline they read, or a few words of 'wisdom' from some shock jock!

I read the Fin. review a bit and if there hasn't been a time in the last 6 months where there haven't been at least two diametrically opposed views on where we are headed then I'll drink monkey spit.

There is a very good article on page 26 highlighting the divergent views on property prices alone. Saul Eslake is reported in the article as suggesting that the property price crisis wont hit Australia anything like it has elsewhere.

• Australia has a chronic undersupply of houses (56,000 houses short)
• The debt stays with the borrower (if you foreclose in USA the debt reverts to the bank) so we are more responsible with our personal debt management
• Mortgage defaults only rose marginally when interest rates were rising, why would they increase when interest rates are falling

He does go onto to say that there are 3 exceptions. Areas where low doc loans were prevalent (Western Sydney); premium property prices will correct and areas where investors are prevalent (large slabs of investment units for example)

There is a graph on the allhomes website which neatly shows the property price correction. The graph is a short term property price return for segments of the Canberra market. The South Canberra component has dipped sharply (this is the elite area of Canberra) while areas like Woden Valley are almost running in the opposite direction. To me, this shows that punters are still spending, but are curbing their spending by a few hundred thousand dollars!

So the maxim still stands (buy, buy, buy) but just just do it wisely.

The dividend/price ratio on some of the blue chip chares is around 15%!!! There are not many areas of investment returning 15% on your dough - just need to be able to ride the coaster for a bit is all!

[damian]

Couple of things.

These are not uncharted economic circumstances. This is a slight variation on what happens every time. This "unprecedented catastrophy" BS is just headlines and hype. I really get fed up when some media tart pulls some obscure statistic and claims this is the "worst drought/flood/economic downturn/bs/bs/bs on record". Only because you fiddled the numbers to make it look that way.

I don't know if the stockmarket has bottomed. Now we have that out of the way consider this:

Do you believe BHP is going to go bankrupt any time soon ? If not it's selling well below it's historical PE ratio and they haven't flagged a downturn in dividends. Consider the same things for the big 4 banks and a few other select blue chip australian companies. I'm not clever enough to pick tops and bottoms but I can tell cheap and dear, and I'm not bad at risky and fairly safe either.

Personal debt in Australia is a disaster, but sucessive federal and state governments in between their otehrwise profound incompetance and corruption have manged to pay down our government debt, and that if nothing else will save us from too much pain.

I don't know how China's exports will go, but I don't think their domestic demand will dry up completely.

Anyway I'm debt free and financially comfortable. I am also amazed I can buy a demonstrator BF2 falcon for $23k on road. Haddn't considered buying a new car till I saw that.

[Metal Head]

Well if Warrens struggling to make money in this market, then what chance have us less mortals got?

Is Warren Buffett losing his touch?

Investors are wondering if Warren Buffett has lost his touch. They are bailing out of Berkshire Hathaway Inc stock and have lost some confidence that the insurance and investment company, run by one of the world's most admired investors since 1965, can pay its debts. Berkshire stock has lost close to half its value since hitting a record high last December, as the company struggles with lower returns at its insurance businesses, the declining value of its stock holdings, and paper losses on derivative contracts. Meanwhile, the cost of protecting Berkshire's "triple-A" rated debt has soared to a level more befitting a "triple-B" or even a junk-rated company. Omaha, Nebraska-based Berkshire has nearly 80 businesses - from car insurance to carpeting, clothing, food, kitchen utensils, and manufactured housing - and owns tens of billions of dollars of stock. Buffett's empire is diversified enough so that at any given moment many parts are unlikely to run on all cylinders. "Everything you're seeing that affects other companies is eventually going to catch up with Berkshire," said Vahan Janjigian, author of the 2008 book "Even Buffett Isn't Perfect". "I'm not saying Berkshire is not well-run, but that even well-run companies will be hit in a severe recession". Buffett, 78, was not available for comment.

Berkshire Class A shares fell as low as $74,100 a share on Thursday, their lowest level since August 2003. That's down 51 percent from their record $151,650 set last December 11. It's also down 34 percent since Berkshire said on November 7 that lower insurance returns as well as investment losses led to a 77 percent drop in third-quarter profit, the fourth straight quarterly decline. Operating earnings were down 18 percent. Berkshire ended September with $33.37 billion in cash. "We're buying Berkshire like crazy. It was our largest position, and we have made it much larger in the last two weeks," said Whitney Tilson, managing partner at T2 Partners LLC, a hedge fund firm. "Investors are looking at the derivative exposure, seeing Berkshire marking losses, and it reminds them of AIG and other companies whose derivative exposures got them into trouble," he added. "They are coming to the insane conclusion that Berkshire faces similar risks".

'UNUSUAL' MARKET

In Thursday afternoon trading, the shares were down $2,760, or 3.3 percent, to $81,240 a share on the New York Stock Exchange. The cost of protecting $10 million of Berkshire debt against default for five years rose to $490,000 annually on Thursday from $294,000 a week ago and $31,000 at the start of 2008, according to Markit. "We're in an unusual time," said Peter Schiff, editor of Schiff's Insurance Observer. "It's like comparing a person having trouble making mortgage payments with a billionaire. The financial crisis affects them, but not in the same way".

Berkshire could have to pay as much as $37.04 billion between 2019 and 2027 under some derivative contracts if the Standard & Poor's 500 index .SPX and three other stock indexes are lower than when Berkshire entered the contracts. It obtained about $4.85 billion of premiums upfront. At September 30, Berkshire had written down $6.73 billion on the contracts. Losses have almost certainly mounted since then. In October alone, Berkshire shareholder equity fell $9 billion, or 7.5 percent. Buffett has said he expects the contracts to be profitable, distinguishing them from the "financial weapons of mass destruction" that he labeled other derivatives. Berkshire also ended September with $10.78 billion in potential liabilities tied to various credit events, such as junk bond defaults, up from $4.66 billion at year-end 2007. Moody's Investors Service said the global junk bond default rate could rise to 10.4 percent by the end of 2009 from 2.8 percent in October. With a typical junk bond yielding more than 20 percent, new financing is essentially nonexistent. "Based on his 50-year track record selling insurance, I have a great deal of confidence he is selling these at the right price," Tilson said. "The critical thing is he does not have to post cash collateral until there are actual defaults". A credit rating downgrade would likely not be material. Berkshire would have to post "nominal" additional collateral on derivatives of "far below 1 percent of assets" if Berkshire lost its "triple-A" ratings, Buffett's assistant, Jackie Wilson, said. It was posting no such collateral as of Sept 30, when Berkshire assets totaled $281.7 billion.

Buffett has been out of step with the markets before. After missing the late 1990s tech bubble, he gave himself a "D" for capital allocation in 1999, when Berkshire's book value barely budged, and the S&P 500, including dividends, rose 21 percent. Berkshire fared better in six of the subsequent eight years. "Earnings of Berkshire's operating businesses will undoubtedly decline given the worldwide economic downturn," T2 Partners' Tilson said. "However, these businesses remain enormously profitable, and will almost certainly continue to be". Schiff, of the Insurance Observer, expects Buffett will actually find new opportunities to win business or make acquisitions, in part because many insurance rivals are scrambling for capital. Several are applying to become bank holding companies to be eligible for the government's $700 billion financial rescue. "When insurers lose capital, you're going to be more conservative with how much business you write," Schiff said. "Berkshire doesn't have this problem because its balance sheet is so strong. What they own may be worth less, but they get more opportunities to buy things at cheap prices".

[prozac]

Some have forgotten the title to the thread - a safe place to park money.

Banks are obviously the worst investment but they are now a safe place to sit and watch things unfold when you're in a situation somilar to mine- one where the cash is very mobile and in an easily accessable state. The banks are just that.

Many are yelling to BUY BUY BUY right now. But I'm a patient non-gambler. I will wait and watch how the picture unfolds. If I see what I believe is a good opportunity I will act on it. But I need to have a clear picture first - something no one has right now.

Maybe I won't make bucket loads at this very moment cause I won't gamble but I won't lose either - there's two side to every coin. I'm also a lousy poker player. Only ever bet when I had something worth betting on. So when I bet everyone usually went out.

Some here think I'm in a panic - wrong. I simply saw serious problems that were founded on what is transpiring now and what has happened historically and wanted to make sure what I have stays mine. Up till a few days ago I viewed the banks here as a liability compard to other banks around the world - now they're all on a level playng field so there's no reason to move.

I left a biggish chunk of cash in a cash management account that my stock-broker sweeps share transactions to and from. I made comment 12-15 months back in a thread in "My Rural Block" that I expected the stock markets to tumble. I even told my broker more recently that the All Ords would go through 4000 and maybe 3000. Well we are nearly there.

Am I a guru, NO WAY! But I do read and what I read back then about what was building in the USA with these housing loans. Basically something that wasn't going to be fixed by taking a pill (read bail-out). I could have got it wrong, after all the stock market is like betting. For what it is worth I think we will have a big shock in the news one morning and the markets will dump, and brokers will be jumping out of windows for a week or 2. The dust will settle and it will go up again.

In the meantime money is going to start hitting the housing market and we are in the early throws of a housing run-up. Property is what I do know about. I don't know a great deal about shares and I am happiest not when i make a lot but when I get out of something before it hits the skids. I reckon that is a bigger thrill, knowing that you just saved your money.

Where would I park my money? I took it out of a Macquarie Cash Management account about 6 weeks back and plonked it in a boring account with CBA. I don't trust Macquarie. Put your money in a real bank.

[Shedhand]

I left a biggish chunk of cash in a cash management account that my stock-broker sweeps share transactions to and from. I made comment 12-15 months back in a thread in "My Rural Block" that I expected the stock markets to tumble. I even told my broker more recently that the All Ords would go through 4000 and maybe 3000. Well we are nearly there.

Am I a guru, NO WAY! But I do read and what I read back then about what was building in the USA with these housing loans. Basically something that wasn't going to be fixed by taking a pill (read bail-out). I could have got it wrong, after all the stock market is like betting. For what it is worth I think we will have a big shock in the news one morning and the markets will dump, and brokers will be jumping out of windows for a week or 2. The dust will settle and it will go up again.

In the meantime money is going to start hitting the housing market and we are in the early throws of a housing run-up. Property is what I do know about. I don't know a great deal about shares and I am happiest not when i make a lot but when I get out of something before it hits the skids. I reckon that is a bigger thrill, knowing that you just saved your money.

Where would I park my money? I took it out of a Macquarie Cash Management account about 6 weeks back and plonked it in a boring account with CBA. I don't trust Macquarie. Put your money in a real bank.

Mate, if I had a million bucks I'd be buying up as many Blue Chip stocks as I could. The fundamentals are sound and most are still yielding good annual divs of around 6% part and fully franked. Very, very undervalued now. Banks especially. DAHIKT!!! The emerging economies still want our resources and they are still growing at or near double figure annual growth. Warren Buffet is buying everything he can get his hands on. Keep an eye on the Lion Nathan bid for CCA (Coca Cola Amatil) This stock is Buffet's long time favourite. CCA has weathered the global crisis well becasue of the unique nature of its business. makes it a natural target for take-over. I'm not an expert but I know a little about investment. A mate of mine turned 10,400 into 250,000 in 8 years from a tip of mine. I'm NOT a financial adviser, I just read a lot and follow the stock market.
Cheers

[Studley 2436]

Certainly is a good time to be watching stocks and looking for a time it seems good to get in. I wouldn't say you have to do it today and it might be very good to just sit on the side for the moment until it settles down a bit.

None the less there are going to be some good opportunities to make some money by the educated investor.

Studley

[prozac]

Mate, if I had a million bucks I'd be buying up as many Blue Chip stocks as I could. The fundamentals are sound and most are still yielding good annual divs of around 6% part and fully franked. Very, very undervalued now. Banks especially. DAHIKT!!! The emerging economies still want our resources and they are still growing at or near double figure annual growth. Warren Buffet is buying everything he can get his hands on. Keep an eye on the Lion Nathan bid for CCA (Coca Cola Amatil) This stock is Buffet's long time favourite. CCA has weathered the global crisis well becasue of the unique nature of its business. makes it a natural target for take-over. I'm not an expert but I know a little about investment. A mate of mine turned 10,400 into 250,000 in 8 years from a tip of mine. I'm NOT a financial adviser, I just read a lot and follow the stock market.
Cheers

Your mate made a brazilian from one of your tips Shedhand. Just wondering if you took your own advice and did the same?