Square Rooted

Been having major problem with the PC this wkend.....So a brief post is all I can manage today.

Basically, the world is having this big debate - is the "recovery" for real ?

The answer is no one knows. BUT I find it interesting that, according to a recent survey, quite a few economists in USA are forecasting recovery in 2010. And a new popular buzz word is " square root". If anyone tells you they know what the answer is, don't believe anything he tells you. Afterall, these same economists did not forecast the current mess in 2007/2008.  Guess we will just have to wait and see.

In the meantime, you have to be living in a cave to not realise the Sydney property market has become a bit more chirpy. Vendors are now comfortable to push up their expectations that little bit. The bottom line is, if you end up paying the asking price without haggling, I suspect you won't save too much relative to the peak.

Quite amazing how Australia can manage to navigate this mess so well......

As to where I stand, I am having second thoughts but suspect the same square root analogy applies here. And that is if we are lucky....Guess I have been "square rooted" by the LNS property market again :)

The best thing since sliced bread....

The property market is getting so boring these days. We went and saw a few houses these past two weeks. The agents came across as more confident. Not sure if this is such good news for the "distressed" buyers out there. Unfortunately, I am one of them and am starting to sound like a broken record. The fact is there are plenty of people out there with enough money to keep the market afloat. Just this week, two of my colleagues have decided to take the plunge and upgrade. It does feel that the market is thawing.....Ouch.....

On the other hand, things are actually getting better elsewhere. The short selling ban on bank has finally been lifted. Another interesting bit of news is we may get to bet (via futures) on the Australian property market. This new "product" is expected to be available in Aug/Sept. Can't wait to read the specification of the contract. You can guess which side of the trade I will take....

Turning to the stock market, suspect we are arriving at an interesting juncture. Now we really need data to proof that the world is indeed getting better. One suspects merely stabilising is no longer enough. Green shoots may no longer be enough. We may need a solid oak tree in its stead if the market is to push on from here. Hold on tight. Suspect the easy money has been made for now. Or at least, we are getting close to the temporary peak for now....

Oh what joy !!!

Today, we went and looked at a few houses in Mosman. We went to this house which has been on the market for quite some time. Quite expensive and out of our price range somewhat. Anyway, there were no other parties, other than the agent. The agent did not even bother to take down our contact details. Haha he saw us when we were parking :)

Anyway, it does seem like the market is thawing. More people are looking. And they are prepared to bid on properties as well. In fact, I notice that several "dated" stocks had been sold in the past 2-3 weeks. It got me thinking...Is my thesis wrong ? Don't know yet because a lot does hinge on the economy.

The Domain blog has been quite entertaining lately. The latest blog features the typical shouting match between the bulls and the bears. One of the bulls even went as far as to suggest one of the bear posters could not afford a property otherwise.

Oh what joy !!! Oh what fun to be a contrarian. One suspects there are more bulls than bears out there. Truth be told, it is easy to join the bullish crowd. Just hit the bank for a 30-year mortgage. But to be contrarian after considering a lot of other factors, it is a different matter. In a perverse sense, I still feel that my "hypothesis" is right for the simple reason that it is not the consensus view. One of the changes which the bulls (people who are buying houses and paying roughly 2008 prices) may not have taken into considation is how suddenly the governments (Federal + States) are running up massive debts. The long term implications can't hardly be positive. Time will tell......

Boring....

After a short hiatus, this wkend we went looking again. Nothing much new to report. Just a few anecdotes:

a) We went to this auction in Waverton. The room was full of onlookers. Two registered bidders but the property was passed in without a bid.

b) The standard line from the agent is there are just no new stocks. Prices are holding firm because the vendors can afford to hold firm in light of tight supply.

c) We noticed that one or two properties that are currently on the market were only bought 2-3 years ago. Why are they "flipping" ?

Just boring really.....

The new paradigm

Something just clicked for me last week.

I have come to realise a new paradigm is at hand. It doesn't apply to the Sydney property market but it does apply to the stock market.

The new paradigm is forget about buying stocks for growth. The stocks that will make you money through time will be stocks that grow slowly but with high probability. In addition, those stocks need to be cash flow generative so they can buy back stocks or pay dividends.

Nothing especially new about this revelation except that the world is now a vastly different place. Do you notice that there was a palpable sense of deterioration in the Australian economy over the past two weeks ? I wonder what is our budget deficit this year ?