One of the disadvantages of being relatively new to the investing scene is that I haven’t lived through several property cycles so I am not able to take that historical experience and overlay it on to today’s situation. However, I do try to pick the brains of the older hands and I find a very common theme.
They virtually all think a slump has been coming for some time (world wide slump). Many expected it 3 years ago. They virtually all think we will see significant drops in value and a return to double digit yields. None of them can intelligently explain why their historically based predictions have not happened yet. :)
I think it is important that it is this historical/fresh contrast that causes so much of the conflicting information we see in the media. Our opinions will always be coloured by our experiences.
A former employer of mine in the property industry cashed up completely in early 2005 and was waiting for the slump that was about to arrive to get back into the market. Nearly 3 years later their money has been languishing in managed funds making them zip after tax. But it was a 50-50 call given the property cycle history. If they’d been right, they might have made some good coin.
In the paper this weekend a leading economist is saying that based on his knowledge and research that it is nonsense to assume that property prices will double in the next ten years. In the same article an opponent states that based on his knowledge and research only a fool would predict that they wouldn’t double. Who is right??
Well I am certainly not going to try and second guess the experts. I believe that as investors we have to do 2 things.
1. Look at the obvious data and make intelligent decisions.
2. Ensure we have rules that will keep us as safe as possible regardless of what may occur.
Take care
Josh
No comments:
Post a Comment