It’s been an interesting time since the last news article went out where the saying “Much ado about nothing” could be viewed as a paradox. We have seen global markets continue their run of serenity in a world that seems to becoming ever more challenging for investment professionals and investors alike.

The VIX or global volatility index for the S&P 500 was at long term lows until last Friday, even as Companies were struggling to achieve profit growth and the increase in share prices was mainly being driven by an expansion in P/E ratios.

Some of the more experienced money managers have recently been quoted like Bill Gross saying “Buy Gold and Real Estate”, which are two asset classes that the central banks have not been buying in large quantities. When I look at this from an Australian investment perspective, I have been adding a currency overlay which has been an important factor in providing greater diversification to minimise risks and maintain adequate returns in this environment. So, I would have added the USD to Bill’s statement as that has been a major positive for our clients over the last 2 years and I continue to favour this position going forward.

I think the global environment we are in is positive for quality Australian residential property whether you are an Australian Expat or living in Australia. The added benefit for property investors is that 80% of the investment is generally funded by AUD debt so that currency risk is largely hedged out and many properties can be almost neutrally geared. This is not a “mark to market” asset class so it makes me feel far more comfortable in making these investments than allocating the funds into bonds or equities given the historically stretched valuations and, in many cases negative yields.

Summarising this from an Australian property investment viewpoint, we continue to favour quality properties in the “inner-middle ring” of the east coast capitals but I am very cognisant of the value disparity that exist between Sydney, Melbourne and Brisbane.

You need to look at the price you pay. If everything else is largely the same, the greater the price you pay, the lower your potential return.

Best Regards,

Doc

Dr Andrew Unterweger  MB BS, CFP®, Dip FP,FPA, AFA, SMSF, Dip FNS, TPB
Chairman

sept-blog

Bill Gross says buy gold and real estate

By John Gittelsohn

Money manager Bill Gross says investors should put their money into gold and real estate while avoiding most stocks and bonds, which are trading at inflated prices.

“I don’t like bonds; I don’t like most stocks; I don’t like private equity,” Gross, who runs the $1.5 billion Janus Global Unconstrained Bond Fund, wrote in his monthly investment outlook on Wednesday in the US. “Real assets such as land, gold and tangible plant and equipment at a discount are favoured asset categories.”

The views echo concerns expressed by managers including TCW Group’s Tad Rivelle and Oaktree Capital Group’s Howard Marks as stocks reached record highs and bond yields plunged to historic lows amid sluggish economic growth. “Sell everything,” DoubleLine Capital’s Jeffrey Gundlach told Reuters last week. “Nothing looks good here.” Read more

david-bassanese

Central bank dovish policy settings are ‘distorting equity markets’

by Vesna Poljak

The Jackson Hole meeting of monetary policy officials this weekend is shaping up as an inflection point in the direction of the US Federal Reserve and its willingness to persist with dovish settings that some fear are fuelling an equities bubble.

David Bassanese, BetaShares Capital chief economist, has become the latest market observer to challenge the Fed’s reluctance to raise rates after it only managed a single rise in 2015.
However, Mr Bassanese does not agree with critics who say accommodative policy settings have not worked.
Instead, his objection is that such settings are no longer needed and pose a real risk to financial stability. Read more

Glenn Stevens admits Sydney house prices ‘give me some discomfort’

by Karen Maley

Reserve Bank governor Glenn Stevens has conceded that he has “some discomfort’ about rising Sydney house prices, but argued that these concerns need to be weighed up against the need to stimulate economic activity.

And he also pointed out that Australia had a new “two speed” economy, with strong growth in states such as NSW, while resource-rich states, such as Western Australia and Queensland, had seen growth rates slump as the mining boom had ended.
Read more …

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