Are we there yet?

Um. No.

Bill’s Opinion

We are not there yet because:

  1. Credit is still at historic lows (before last year, it had been at 0.3% or lower only 4 times since 1973), and
  2. The price rises are on the back of almost 50% lower transaction volumes.

Let’s see how things play out between now and the summer holidays.

9 Replies to “Are we there yet?”

  1. I would say that the bottom is now in, although price rises are a long way off down south. In order to kick start it down there we need more than rising take up in first home owner grants and record low rates, even though you can now get a home mortgage with a rate starting with a 2! Something like a 50 year mortgage will do it, okay that may be a long bow, so I will settle for a 35 year mortgage, that will help those poor young families addled with FOMO in making that very first important foundation step of getting on to the ladder.

    I am putting some more skin in the game in that sector as well and bought shares in Nick Scali yesterday. It was a toss up whether I buy into carsales (upcoming dividend as well) or REA group tomorrow. A cursory diversification check of my portfolio would say that I am already balls deep in property and should buy carsales, but after reading some further analysis today, it looks like REA for me tomorrow, Trump tweets tonight depending.

    By the way I am out of banks now other than CBA, keeping that one as a low growth safety one.

    https://www.rba.gov.au/chart-pack/images/household-sector/housing-prices-small.gif

      1. Hardly, analyst don’t even bother looking at them.

        I only buy when there have been a number of analyst have had a look at their books, they have an independent foretasted three year return on equity (shares) of at least 20%, have a fully compliant financial health on both current commitments and balance sheet. Then I need to decide if the stock has tailwinds or not. Thats why carsales lots out in in the end, they have massive forecasted growth (48%), sound cash flow but 157% debt (although well covered by cash flow) a chance of headwinds with their overseas business. Whereas REA have 32% growth prediction, excellent cashflow flow, 34% debt that is covered by cash flow and short term assets, no headwind and tailwinds with the market bottoming out and volume of listings increasing.

        An upcoming dividend is attractive as is recent insider buying a “nice to have” and if I have two stocks equal on the mandatory criteria above then a lead in these preferences will push it that way.

        That simple selection systems seems to get me above market results.

          1. Slight change in plan to the batting selection for tomorrow. Warner sorry AFG is being dropped in place of Noni B as a way of me getting in touch with my aging female side and the ever increasing number of them that exist.

            They have a forecast growth in return on equity of 31% in three years, strong cashflow and only 28% debt, the clincher was a dividend of 9.2% in 30 days. Like I was saying, why would you bother with cash deposit interest rates at around 3.5% per annum which is a mere 0.3% in 30 days in comparison.

            https://www.nonib.com.au/noni-b-group

  2. Ah the good old property market. I did very well out of the NASDAQ, turning my miniscule retirement savings into not so very miniscule at all, after taking a plunge in 2009 when QE started. My bro in California bought a house around that time and is showing a good profit. The natural home of money is the markets and when the central bank pumps more cash into circulation than GDP growth can absorb, stocks and housing are good bets. Viva index funds viva.

    Predictions are difficult, especially about the future. Proof that horses are smarter than humans is that horses never bet on people.

    1. Its rare to meet anyone that hasn’t done well in property over the longer term.

      As for stocks, in this day and age of low interest rates, I cant understand why savers don’t just buy and sell strong stocks for their dividends alone, they would be miles ahead of leaving it in a loan saving account on that score alone.

  3. I am seeing a minor rise in stress in my little portfolio of $15bn. The causes are several, and apart from the horrendous lending that has been tolerated over the past 12 months or so, the flattening/fall in retail activity is hurting but not fatal just yet. We have seen this in the supply chain. Definitely pressure growing and fraud has kicked up a bit compared to prior years. Most borrowers are completely tapped out, except in our property portfolio. We stayed to the conservative end, stress is very low, and the smart ones are waiting with money and capacity.

    Could still go either way, but I am thinking this year remains okay, and we either get a stimulus or external shock or benefit that sends it either way. Bankers desperate to lend are increasing the crunchiness of conversations.

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