[KnowItAll]

This is why I don't hang out with bankers and accountants ... crushing my dreams all the time.

[chris_in_hk]

Summary:

Owing/buying a property - Good
Investing in stocks/funds - Very Good

But everyone needs to live somewhere so that generally means get a place of your own, pay your mortgage and invest in stocks/funds at the same time.

Investing in property (as an investment rather than a place to live) isn't as good as investing in stocks/funds. Of course there will be periods of time when investing in property for investment's sake will outperform stocks/funds.

Buying a place to live is better than long-term renting.

[freeier]

kia.. u can always put a filter in your forum that any messages with more than 10 numberic codes inside are filtered automatically.

8-P

[HK_Newbie100]

Owning property and stocks would seem to be good investments historically only because you’ve been LUCKY enough to live in a period of rising stock and property prices, so you assume that that trend will continue. Case of being in the right place at the right time.

It’s not always the case. If you had bought stocks and property during the peak of 1929, over the next 3 years, you would have lost 90% of the value of your stocks, and 80% of the value of your house, and would have had to wait 25 years for prices to recover to their peak.

Crashes of similar magnitude have occurred throughout history, and many say we are about to enter one very soon. All the signs are there such as historic levels of debt, the current property and stock mania (that’s beginning to fall), rising commodity prices and inflation, and so on. Because the current bubble is by far the biggest in history, the resultant crash could also be the biggest and longest ever.

Rather than recommend stocks and property, it may well be a good time to cash out of everything and just take stock of things for a while. For the more adventurous, they might try buying commodities and shorting everything else. Crashes are sudden because they hit like a bolt of lightning, then everyone rushes for the exit at the same time, which further exacerbates the problem. You need to get out in good time, and what better time than now, when prices are still peaky.

Recommending stocks and property now is like sending lambs to the slaughter.

[freeier]

it is a matter of opinion.
technically, economically, the world has to inflate. so that means in the long run forgoing any short term blips (short term = 5 years ?) our money has to sit in a economically productive instrument.. i.e. mostly shares, or property for the cash flow.

compared to 1929, there are much more cash lying around now, with more liquidity ready to soak up perceived bargains. information are flowng faster and for every panick seller there would be some sensible buyer at the right price.

let's assume the scenario that S&P is to drop to 100 pts. i.e. 90% crash. the only way any one of us can escape from that is to cash out now and keep all our money in gold or some other precious metal and keep them at home. with such high leverages, none of the financial institutions are going to survive a crash of that magnitude. any money kept in the bank or financial instruments bought/sold with the exchanges are not going to be 'realized'. i.e. you can be right by shorting S&P at 1200 and seeing it crash to 100pt, but you won't be able to get any single cent out of it as CME is going bust because of all the longs that cannot afford to pay them.

other than gold, which will be kept more for the 'precious' state, the rest of the commodity will crash as well because construction and industrial demand will evaporate.

hence, in such scenario, u are not going to win anything by shorting, so why would anyone want to take such a one sided bet ? 8-P


nevertheless, i do agree that equity is not looking rosy. market is due for an overall correction and maybe of a magnitude we cannot really expect. just the potential of a 90% crash of the market is slightly too far fetch....

8-P

[chris_in_hk]

When I say long-term I'm thinking 10+ yrs.

Sure, there's been crashes and long bear markets and some areas are looking rather 'hot' and inflated at the moment. However, if you pull out of the market totally and it doesn't crash or go down, but continues to go up, you've lost that opportunity cost. Having your money in cash only means it gets eaten by inflation.

If you think the market is over-valued then reduce your holdings and build a bigger cash position. But I don't think I would ever be fully out of the market.

If you look at the average P/E of the Hang Seng Index over time, the current valuations of the HSI are around average now, or slightly lower considering the recent falls.

You can't gain from the market if you're not in it. Though I wouldn't advise people blindly buying stocks or property.

[Mat]

U wanna be a millionaire...Marks 6 is the solution...if not then if you are still young (below 30 years old), greedy and unkolwdgeable you can become a Trader, screw your customers and within 3 years retire with a few millions...

[nemrac]

Mat, I like your idea about Mark 6, shall get myself a ticket tonight :P

[HK_Newbie100]

markets are a zero sum game. For every buyer there is a seller. If I short, then somebody has bought, and I profit to the extent that the other guy loses. When markets are falling, many investors will hold on to their investments in the hope of a rebound. Then there are those that regard prices as being ‘cheap’ or ‘bargains’ and will newly enter the market to buy, providing new liquidity for the savvy investor to keep on selling and pressuring prices. If prices resume their fall and the buyers, new and old, sit on huge losses and start panic selling, that’s when they create a huge free fall in prices as an absence of buyers emerge, plunging prices further and further, until at 70, 80, 90% decline, many short sellers will decide to cover their shorts by buying back that which the buyers have been trying to sell to stem their losses (but had no takers). At the end of it all, the short seller will get every penny that his/her opposite number (the buyer) has lost. That’s how profits are ‘realized’.

90% falls are possible, precisely because many people don’t believe it can happen, stubbornly holding on to investments as prices fall. But a look in the history books shows that such crashes can and do happen. Not only that, it’s all a very natural part of the long term economic cycle. And many a pundit are right now predicting such a crash. Believe it or not, for your own financial well being, be open to the idea it can happen.

[freeier]

hk newbi 1000,

suspect u are one of those that tried to punt the hk market like the hk aunties and uncles and got burnt, and now coming to preach against the market.

very unfortunately, u are wrong. the market is NOT a zero sum game.
unless, u are talking about forex, yes...

stock, the fundamental of understand of a share, is the ownership of a company that is doing business and making money. if u cannot set up a business yourself, then thru publicly listed share, u own a small minute percentage of the company.

the dividend, or the retained earnings, are what that are fundamentally increasing the capitalization of the market.

so for a short term u can say its zero sum, but once u go into longer term as any investor does (repeat, investors, not speculators), the sums is net positive in accordance to the expansion of the economy.