Weathering a potential 2007 bear market

[Jimmy001]

Just wondering what everyones thoughts are on where they'll invest if things go sour in 07..

Anyone reckon the property sector might weather the storm better since its been running fairly independently of the rest of the economy? How about the resources boom... when will you start hedging toward cash or other sectors etc?

 

[It's Snake Pliskin]

Re: Weathering a potential 07 bear market

Jimmy,

I'll probably invest in a more comfortable chair.

 

[Wysiwyg]

Re: Weathering a potential 07 bear market

Just wondering what everyones thoughts are on where they'll invest if things go sour in 07..

Could you be more specific please? Do you fear an aussie stock market crash?

 

[Smurf1976]

Re: Weathering a potential 07 bear market

Just wondering what everyones thoughts are on where they'll invest if things go sour in 07..

Anyone reckon the property sector might weather the storm better since its been running fairly independently of the rest of the economy? How about the resources boom... when will you start hedging toward cash or other sectors etc?

With the number of houses for sale steadily rising (at least here in Hobart), houses way overvalued by practically any historic measure of value, consumers up to their neck in debt, rising living costs and rising interest rates, housing is the last thing I would be investing in right now.

Even cash has outperformed many real estate markets of late, especially in parts of NSW and Tas (noting that Tasmania is officially in recession and NSW is damn close too).

The time for property will come but booms generally don't start with markets overvalued and yields so low as they are at present. Not usually anyway (I'm not saying it's impossible, just that it's unlikely).

Of course it's still possible to make money in real estate. But just buying random houses that you've never even seen and couldn't find without a map was a popular strategy during the boom. But we don't have a boom now so you need a very different strategy if you're going to make money in real estate. I hear the repossession business is doing rather well lately...

As for resources, I note the huge falls in contract coal prices (according to media reports). Long term I'm certainly bullish on commodities, particularly oil and gas, but short term many have gone too far, too fast IMO.

But there's always a bull market in something somewhere. The issue is finding what and where.

 

[Jimmy001]

Re: Weathering a potential 07 bear market

Could you be more specific please.Do you fear an aussie stock market crash?

Well I am looking to get into some trading, but also moving capital into a managed fund.. which raises a few questions since it would make textbook sense not to select a managed fund that is also heavily in equities.. but then on the other hand cash and fixed interest rates aren't much better than a savings account. Meanwhile, some funds that 90-100% committed to property have been doing very well, but I have no idea how that will fare in the future (growth to date seems too good to be true).

What would people go for in a managed fund? Stick with Australian equities while they're still earning well or starting hedging a bit?

 

[Wysiwyg]

Re: Weathering a potential 07 bear market

Well I am looking to get into some trading, but also moving capital into a managed fund.. which raises a few questions since it would make textbook sense not to select a managed fund that is also heavily in equities.. but then on the other hand cash and fixed interest rates aren't much better than a savings account. Meanwhile, some funds that 90-100% committed to property have been doing very well, but I have no idea how that will fare in the future (growth to date seems too good to be true).

What would people go for in a managed fund? Stick with Australian equities while they're still earning well or starting hedging a bit?

I'm no expert but my thoughts are if you get some teaching on shorting stocks it will help in profiting from a downward trend. I find teaching myself rewarding in the fact that I am completely responsible for my finances and hence don't use fund managers. I have a savings account at 6.25% for a parking spot if things go funny. I'll act to whatever the stock market does and am confident the experiences will be rewarding.
Sorry, I don't have any magic words to answer your question consummately.

 

[scsl]

Re: Weathering a potential 07 bear market

Well I am looking to get into some trading, but also moving capital into a managed fund.. which raises a few questions since it would make textbook sense not to select a managed fund that is also heavily in equities.. but then on the other hand cash and fixed interest rates aren't much better than a savings account. Meanwhile, some funds that 90-100% committed to property have been doing very well, but I have no idea how that will fare in the future (growth to date seems too good to be true).

What would people go for in a managed fund? Stick with Australian equities while they're still earning well or starting hedging a bit?

Why not try a hedge fund? Hedge funds aim to seek positive absolute returns, regardless of the performance of any index or sector benchmark. They have been quickly gaining popularity, because volatility in the market has increased and above average returns will soon become a thing of the past. They can engage in more aggressive strategies and positions (such as short selling) and using leverage. However, this means that hedge funds themselves can also be volatile, which is why a fund of hedge funds could be better. They are a lower-risk option because the fund of hedge fund manager does the due diligence on the underlying hedge funds. There are quite a lot hedge funds out there if anyone's interested...

I would recommend people have a close look at HFA Holdings (HFA) - it's a specialist funds management company providing absolute return fund products (both multi-strategy fund-of-funds as well as single strategy products with exposure to Australian and international markets) to retail, wholesale and institutional investors throughout Australia. If things do go sour and we should enter a prolonged bear market, I think HFA will definately do well. For one, the ever-growing savings/superannuation pool will have to end up somewhere and if people aren't putting it into shares, they will go after the (managed) funds that do their best to achieve positive returns - which is what HFA is all about. Please DYOR and I encourage you to read, read and READ about hedge funds, the industry and HFA. There's a HFA thread here on ASF too.

Disclosure: I hold HFA shares.

 

[reece55]

Well, there are a few stocks you can bet on to weather out a storm IMO...

These are WPL, BHP, MBL and WOW........... These stocks I would hold as long as required......

Just my opinion tho.....

Cheers
Reece

 

[scsl]

Well, there are a few stocks you can bet on to weather out a storm IMO...

These are WPL, BHP, MBL and WOW........... These stocks I would hold as long as required......

Just my opinion tho.....

Cheers
Reece

If we're talking a bear market that comes as a result of both the US and Chinese economies slowing down, then I probably think that WPL, BHP and MBL might not fare so well. WOW, as an important consumer discretionary stock, should do relatively better IMO. But as you say, if you hold long enough i.e. until the next bull-market arrives and takes these stocks to greater highs then yes, why not.

 

[wayneL]

Everything depends on how vicious the bear (if any) is.

A little koala bear won't do any long term damage.

A grizzly will take everything out.

The conservative use of options with a long term portfolio will help at least soften the blow and could even enhance.

Just my

 

[krisbarry]

Going by most predictions the aussie market should do very well over 2007. At least 10% gain, but of course with a few market corrections. March could be the month, if the reserve back raises rates again.

 

[nizar]

Going by most predictions the aussie market should do very well over 2007. At least 10% gain, but of course with a few market corrections. March could be the month, if the reserve back raises rates again.

Stop.
How accurate are "most predictions"?

 

[krisbarry]

Good question...who knows?

Ther answer is 50/50 right...50/50 wrong

 

[markrmau]

Going by most predictions the aussie market should do very well over 2007. At least 10% gain, but of course with a few market corrections. March could be the month, if the reserve back raises rates again.

This is what has me worried. Every year since the bull market started, market commentators have been warning not to expect the good times to last, the market is over heated, blah blah blah. Now we have predictions of further gains.... Time to look out for one of Nassim Taleb's black swans?

PS Wayne, love the koala/grizzly reference.

 

[theasxgorilla]

Makes your smile doesn't it? I recall going to a couple of seminars back in 01-02 where "gurus" advised that "we cannot expect the double digit returns of the last decade to continue, we must be prepared to accept that high single digit returns will be good this decade".