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Some investment ideas for 2010 |
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Some investment ideas for 2010
We have discussed frequently that a major & safest objective is to reduce our debt levels. When the average mortgage debt is 367,000 then someday it is meant to be paid. The GFC reminded us all that that is a very comfortable strategy. Remember that the average means that 50% have debts greater than 367,000.
The fact that big spending governments & property spukiers haven’t yet to head the message suggests that another reminder is around the corner. At the very least they will have to adjust to higher rates.
However our active wealth strategy has the philosophy that owning the home is not sufficient. If we need 1,000 to live on per week then we need 1 million in capital outside the house. The house & its capital does not produce an income. Hence we need to consider investing elsewhere.
We believe that your home is sufficient property to own. We only need to push the stroller around the block to recognise a rental property & how well tenants look after property. Most landlords are reluctant to raise the rental & hence they never earn the fair return. We believe that positive cashflow only occurs in property spukiers modeling.
Let’s look at some other investment themes & recall that Australia is say 2% of global economy
We hear the China story but there is the ‘other China’ i.e. the Chinese dispora be it here in Australia, Singapore and Taiwan or through Asia. We only need to return here from there to know of their industry, high tech & work ethic. Taiwan relationship with china has significantly improved & hence great growth potential.
Another & very close to home personally is South Korea. You would struggle to find a 4 bedroom unit in Brisbane but many Koreans live in such. They have more PhD per head than anywhere else on the planet. Who doesn’t have a Samsung or Hyundai product & both of these have higher ratings than Sony or Mercedes?
Even closer to home is Indonesia & a top 20 country. There have been significant government reforms & remember we only read the bad headlines in the Australian press.
Two other economies that have been getting the bad press have been Japan & the US. Japan has had deflation for a cycle of 17 years & has some great brands. It is after all the 2nd largest economy. Then the $US has fallen & is being rubbished quite reasonably. But it is the world currency & if we check out the big Mac index it is undervalued. What is down goes up sometime?
What has also gone up of late is gold & China. Just maybe they are due for a correction.
We suggest these ideas as Australian property is not the only investment available. The top 20 Australian shares make up 70% of the Australian index. Those SMSF & others sitting with cash can’t sit there for ever. The Accelerator Principal which we read in Samuelson in Economics 101 states that if you are standing still then you are going backwards relative to others.
We welcome you to a meal to discuss how our active wealth strategy & how to structure debt & build the portfolio.
John McAuliffe
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