BillyB, Aster, JR8 - To Sell or Not to Sell?

[Strong Eagle]

Given that the Europeans can't figure out what to do with Greece and the Euro, and given that the Republiclowns in the US seem determined to drive the US into recession with austerity cuts, I'm seeing a double dip recession on the horizon and not very far off.

I am seriously considering selling out of every stock position I have... at least in my IRA's where I have no capital gains consequences for doing so.

Thoughts on moving into cash?

Thoughts on alternate investments? How will Australia do through the next recession? I've got a self directed IRA that can invest in a lot of things, from property to small business to REIT's.

[BillyB]

My take:

Dump the lot and spread it across cash, fixed income and commodities.

In equities, without using derivatives, its highly unlikely that you are going to see any type of performance better than the underlying index - and all the majors, except ND, are taking a tanking this year and are also wildly unpredictable. Equity based hedge funds are struggling globally, with very few exceptions, so if they can't beat the market it's indicative of the current climate

Most collective investment schemes are glorified index funds - they do ok during bull markets and less-so during bears. There isn't much value add or alpha other than what the markets do.

Australia is better positioned than the West. The banks are in good shape and are already ahead of the capital adequacy requirements - Basel 2.5 and 3 - meaning they have strong balance sheets to ride out anything rough that heads their way. A strong banking sector is usually a good sign to the wider economy.

There are still ways to get a return on your money, it just take a bit more effort than needed during the bull markets.

[JR8]

Hmmm.... that's a big call, and depends on your own circumstances.

For me, I too see that the dung is going to hit the fan again. Gauging how much is priced in is hard to tell. No amount of QE is going to rescue the EU/US from debt.

I'm currently in cash. Earning 0.5% call, and 2% on 90-day. Meanwhile inflation is c.5.2%, so even on 90-day my cash assets are going backwards at 3%+ p.a. This is intentional, i.e government policy. It is part of the central banks own plans to deflate away their debt, but it's a bitch as it punishes prudent savers.

I'm in the process (opening up the various bank/trading a/cs) of moving significant funds into high-yielding, and pretty 'boring but reliable' stocks. For example Vodafone is yielding over 5%, as are (or were a week or two back) Aviva, RSA, National Grid. At least the yield should keep pace with inflation. Any growth would be a bonus. If I can write options off the back of the positions well then double-bonus. Once I have the framework in place, I'll look much more closely at the likely acquisitions.

I'm going to get the accounts set-up. Funds on tap. Then wait for the inevitable big dips that will come along now and again to buy in, hopefully, maybe, over the next 3-6 months.

[JR8]

When you mentioned having a self-invest IRA and property, I'm not sure whether you mean physical property that you buy yourself.

If that is what you mean, then it is a sector in which I hold the majority of my long-term assets.

It has pros and cons,
Pros
If you get in at a good price, in a good and/or improving location it can yield reliable and hopefully inflation-linked returns into the future.
There is something nice driving by a physical investment, rather than just looking at numbers on a statement.
Having a good working relationship with your tenants is rewarding in it's own rights (esp. if the property is in what you consider your community).
You can readily leverage via mortgages.


Cons
The transactional costs tend to be pretty high, so you can't jump in and jump out again. Realistically you have to treat it as Long Term Buy and Hold, and therefore you need to know from day one that the net figures will stack up through both good and bad times.
You might have to employ agents, and even then it can still be quite hands on.
To be on top of the game you need to be up to date on property law/taxes etc., and it all takes time.


Big subject area, but there are a few thoughts.

[Strong Eagle]

Thanks for the info, gents. JR8, yes, a self directed IRA lets me invest in property directly. Only a few strings. Can't sell my house into the IRA. I'm already into commercial warehouse space in Houston via a limited partnership and will probably look at more real estate if the numbers look right.

Residential real estate is upside down in much of the US. With taxes, insurance, and P&I, depressed selling prices, and rents way down, it's very hard to turn a profit.