Money Printing, the ultimate treatment for financial market ailments?

Disclaimer: Not financial advice (as with anything else in this blog)

With endless money ‘printing’ and liquidity injection, the US Financial Markets have almost completely (if not completely) decoupled from their underlying real economy. Financial markets globally no longer represent the general health of their respective economies by any reasonable measure I feel.

The decoupling I believe started way back in the Global Financial Crisis of 2008 when liquidity creation was employed to restart the economies. So far since then, it seems when any sort of crises happens to spook the market, the treatment response has been to pump even more liquidity into the system and it seems to have been surprisingly extremely effective at least at treating any symptoms for the last 12 years.

What the end game is? I don’t know. It goes back to a post I penned back in November 2019 where I asked what would be a trigger to a sustained correction? (Not just short sharp corrections of the types we’ve been having recently)

One potential threat which could end up defeating the effectiveness of such monetary policy would include some sort of catastrophic, devastating and tragic famine by way of insect plague or widespread natural disaster where food security gets impacted and food supply contracts causing food prices to spiral out of control (by way of hyper inflation) where people find themselves being forced to sell assets into a sliding market to feed themselves and their families just to survive. Continue reading “Money Printing, the ultimate treatment for financial market ailments?”

Money Printing, the ultimate treatment for financial market ailments?

Bull Trap Warning still in force (currently)

Update: 6th June 2020 – The Bull trap assessment, as a prelude to a sustained bear market, is increasingly looking shaky with the current short term bull market likely to challenge previous highs. Longer term Secular Sideways market view, with large bull and bear cycles, still stands.

The S&P 500 is still behaving in a way that signals a possible (rather than probable) bull trap. Again, nothing can be said for certain and this assessment is very much certainly subjected to change and re-evaluation on a dime.

Main concerns at the moment is the inherently delayed corporate and economic reporting (including unemployment rates) where the full of effects of the measures behind CoVid-19 may not be fully realized and reported on until a few months down the track. The effect and global reaction so far has been sufficiently deep as to invoke a long-lasting change in the way we go about our lives going forward. At the moment, my feeling is that the latest bull leg (given the unexpectedly large magnitude and severity of the preceding fall was certainly to be anticipated) has mis-priced the effect of the measures surrounding CoVid-19 I feel.

Laying out the possible scenarios in a very broad and general way for my own edification… Continue reading “Bull Trap Warning still in force (currently)”

Bull Trap Warning still in force (currently)

If you want to buy a home to live in, then buy one

My Feeling is the same as it was in 2012, If one needs a house to live in and it looks like one is in a position to finance it (with a buffer one would deem comfortable) then by all means, I would look to buy a home.

Attempting to “time the market” is at best difficult if not impossible. I can’t say what would happen in the next few years. For all I know, we could have a volcano blow up under Auckland or another equally unforeseen disruptive event and houses prices could then crash through the floor. At the moment, all the information I’ve seen around the place suggests that house prices are on track for single digit percentage gains across the board in New Zealand for the next year or two, but I reiterate, who the freak knows in this bizarre market, particularly given the distortive effects of a decade of seemingly endless and inefficiency encouraging “stimulus” Continue reading “If you want to buy a home to live in, then buy one”

If you want to buy a home to live in, then buy one

Too early to call

Noticed anecdotally that a few commentators have been suggesting the Housing market is “Finally turning”. I feel (fear) this may be premature. The fundamental Demand side factors appear to be still present and instead of a flattening of prices in the longer term, I see a period of consolidation before house prices across the country will possibly ramp up again continue their unrelenting  march to higher levels of (in my personal view) pricing insanity…

On broader economic matters…  I have a confession to make, I declare I no longer feel I have any understanding of present day economics, I struggle to make much sense of why the crowds and markets will act in the way they do.  At the moment, the only things I feel I have to go on is both “A trend is more likely to continue than reverse” and “The Trend is your friend” as being the two (related) statements which seem to have any relevancy.

Ended up in March stopping out of my “Short” position against the NYSE:SPY / S&P 500 Index (which I only held for a few short months) and immediately went “Long” on the underlying after determining that the the consolidation was merely a continuation. Perhaps thanks to time decay, the actual loss on the short position was minimized to breaking even. (I don’t plan to use derivatives much apart from the occasional hedge)

Too early to call

Binary Options Warning + Malignantly ineffectual ASIC

Please note, As always, These are my own personal (non-expert) opinions and should under no circumstances be purported as fact

The Australian Securities and Investments Commission (ASIC) have in my own personal (non-expert) opinion been utterly derelict in their duty to oversee and enforce financial regulations. May be it’s not entirely their fault, I wouldn’t know, all I know is that there is a proliferation of dodgy investment products being promoted on Australian Shores by way of high pressure cold calls to prospective investors.

In my own personal mind, It beggars belief that outfits such as World Binary Exchange (WBE) among others have been allowed to continue to promote their services from Australia to Australians and beyond (in my case, to buggers like me, living in New Zealand) without an Australian Financial Services Licence (AFSL) for as long as they have.

I recall being contacted by this Mob (being World Binary Exchange) several times about a year ago engaging in what I feel was some pretty high pressure cold calling to try and sign me on to some funny trial. I told them I wasn’t interested and then blocked their number (with multiple attempts recorded). Continue reading “Binary Options Warning + Malignantly ineffectual ASIC”

Binary Options Warning + Malignantly ineffectual ASIC

Apples and Oranges

This is a “living” Post (Meaning this post will keep changing as I investigate…)

Important: Please read the disclaimer before continuing to read this post

Take one asset class… Commercial and Industrial Real Estate Investment Trusts (REIT) and then another… Direct Investment into Residential Real Estate.

It would appear that Commercial / Industrial REITs as a broad asset class has well and truly under performed against Direct Residential Real Estate investment in Auckland. But why, I’m not quite sure and hence why I am now investigating.

Points of difference I currently see (over direct residential investment)…

  • Auckland Residential rental yields are low. (3% may be 4% Gross).  REIT’s rental income are around 5-6% NET across a given REIT’s portfolio. (As a side point, other costs aside, Dividend yield is around 5-6%)
  • REITs are already inherently leveraged to some degree (30-40%)
  • Appears to be Less Work involvement with managing this.  (Managers of REIT do must of dirty work and heavy lifting as it were, Less complicated Tax Returns to file at the end of the year).
  • A minor advantage is perhaps the liquidity.  You can exit your investment quickly.

In terms of say Goodman  Property Trust (Ticker GMT on the NZX)(I use Goodman in this example because it is perhaps the REIT that I am most familiar with), There was fairly modest to significant declines in valuations from around 2009 to 2012 (where the Auckland residential market was already rocketing away).  While flat Valuations persisted until around 2014 before the valuations very very started slowly turning around and then started taking off at a modest 8% for the 2015-2016 financial year.  None of this sustained 20% year on year price increase as seen in the Auckland Residential Housing Market… Yet.

On the surface, it would appear to make some sense (for me) to invest in say the likes of Goodman Property rather than continuing to chase the Residential Property Market up, by buying another rental…


…But More to come I guess. (As I investigate further)

Disclosure: Current Investor in Goodman Property Trust (as well as other NZX listed REITs), Planning to add more.


Apples and Oranges