Dr. Marc Faber: How not to lose money?

I have the greatest respect for Dr. Marc Faber and his insights have so far been spot on. In a recent interview, he said "I am ultra-bearish about everything geopolitically. In an environment of money printing, we have to ask ourselves, how do we protect our wealth? ... Where do we allocate the money?"

In summary:

1. Treasuries:

"U.S. government bonds are junk bonds," Faber said. "As long as they can print, they can pay the interest. But another way to default is to pay the interest and principal in depreciating currency." (AK71: Yup, countries inflating their way out of hard times has been done before.)

2.  Cash:

Specifically, the problem in Faber's view is the loss of purchasing power as inflation whittles away the value of money. (AK71: I believe he is referring more to the US$ and also the Euro. The S$ has been strengthening and we are still seeing inflationary pressures but it would be much worse for the US$ and the Euro.)

3. Stocks:

If you print money, stocks will not collapse. (AK71: I am sticking to my plan like glue! Remember my plan?)

4. Emerging markets:

Faber's own stock portfolio is centered on dividend-paying Asian shares, particularly in Malaysia, Singapore, Thailand and Hong Kong. These include a variety of real estate investment trusts and utilities. (AK71: Honestly, I knew that he was a fellow investor in Hyflux Water Trust but I did not know that he is also into REITs! I like this. Stick to the plan!)

5. Gold:

Faber is convinced that the price of gold will continue rising and that any pullback is a buying opportunity. And as a currency, Faber said gold should be held in its physical form and not in shares of gold miners or even exchange-traded funds. (AK71: I have recently replied to a reader that I feel that I am underinvested in gold and silver. However, being in Singapore and having S$ denominated assets, I feel much safer.)

Read complete article here.

Related post:
1. Sleep well at night with a plan.
2. Hedging and precious metals.
3. Hyflux Water Trust: Privatisation.
4. Staying positive on S-REITs.

Equities in USA and Europe to do better in 2011.

Dr. Marc Faber shares his latest views on global equities in this interview with CNBC Asia last month.



I think what we should realise is that equities in USA and Europe could outperform equities in emerging markets by simply having relatively smaller corrections. It does not necessarily mean that they would outperform on the upside, they could just be less dramatic on the downside. Now, that is sobering.

However, Dr. Marc Faber's advice is still to stay in equities and commodities as these are expected to do much better than bonds and cash in the next decade.

"I am very negative about the world, because I think that what caused the crisis in 2008 was excessive credit growth, excessive leverage in the system, and now the private sector is de-leveraging, but governments are printing money, and through huge fiscal deficits are creating even more debt growth. So in other words, what killed the economy is now being applied to revive the economy, and I think this will lead to a disaster. But if you think it through and you believe in the disaster scenario I'm envisioning, then you will be better off in equities and in commodities than in government bonds and cash."

Saizen REIT: AK71 responds to a forum.

This is almost all of my very long comment in Wealth Buch in response to certain things said in a forum on Saizen REIT:

I have talked about the Japanese debt situation and how this has no impact on Saizen REIT before:

Japan's debt issue and Saizen REIT

As for the S$/JPY exchange rate and how the strong JPY is likely to weaken in time, we have to remember that exchange rate is bilateral in nature. The JPY could also weaken if the S$ strengthens.

MAS is allowing the S$ to strengthen in order to contain inflationary pressures. Will it allow the S$ to strengthen much more? If it does, would it not impact our exporters negatively? MAS is likely to be very cautious.

The residential real estate which Saizen REIT is vested in is below replacement cost. This means that no one in his right mind would construct new buildings. The supply side has stalled. The demand for inexpensive accommodation is strong and I have a blog post on this recently.

Asterisk Realty: Advisory for Japanese real estate

Saizen REIT owns freehold properties. Income distribution is therefore perpetual, ceteris paribus.

As for rental rates lowering 4% in Saizen REIT's latest tenancy renewals, how much of its total tenancy were so affected? Would such a trend continue?

The assumption that rental rates would continue to lower in Japan is just an assumption and is something waved around by people who think that Japan is going to the Land of the Dodos.

Jim Rogers is long JPY and believes that it will remain strong.  Marc Faber believes that people are so bearish on Japan and have written it off that it is a strong contrarian play. The JPY is still viewed as a safe haven.

In recent months, China's purchase of JGBs caused the Japanese government some concerns. The Chinese recognise the safety of JGBs compared to US Treasuries and have been diversifying away from the latter. As long as there remains a strong demand for the JPY for various reasons, the JPY is likely to stay strong. It's simple economics of supply and demand.

The recent revival of interest in Japanese real estate because of the sector's amazing yield is likely to increase demand for the JPY too. People who want to invest in Japanese real estate must pay in JPY.

It is not wrong to say that the high yield is normal for real estate in Japan but such high yield is not normal for real estate in some other countries, countries in which investors would like to get better returns for their money.

Related posts:

Saizen REIT: AGM on 19 Oct 10.
Japanese real estate: Has it bottomed?

Gold nearing US$1,300 an ounce.

Gold is currently at US$1,293.50 an ounce and silver is at US$21.05 an ounce, even higher than just a week ago when I said "I see immediate support for gold at US$1,260.00 an ounce and immediate support for silver at US$20.20 an ounce.  Gold is now challenging resistance at US$1,270.00 and if it does break this, it could go much higher."

The Fed seems ready to increase liquidity in the US economy and this could possibly cause the US$ to depreciate further. What this might translate into is greater inflationary pressure in the USA in time and I have been a staunch believer of this eventuality as informed by Dr Marc Faber and Mr. Jim Rogers.

The worst thing to invest in would be the US government bonds (treasuries) as bondholders would basically be seeing their wealth eroding away as the US$ depreciates in value.  This is precisely why the Chinese government is so concerned since they are the world's largest holder of US$ debt, after Japan. However, in the short term, they could see bond prices bumping upwards because the Fed would buy bonds to keep interest rates low in an effort to encourage borrowing by the private sector.

Could gold go much higher?  It is my believe that it would but it would not be a straight line up.  The real value of gold is closer to US$2,000 an ounce and this would take time to materialise. So, for anyone who is thinking of having some exposure to the precious metal, it is my opinion that buying on pullbacks as supports are retested would be the way to go.

Related posts:
Gold and Silver highest in the last 12 months.
Real value of gold.

Invest in Asian equities and inflation is here to stay.

Invest in Asian equities and forget US Government bonds (Marc Faber on CNBC, 16 Aug 10):



Inflation in Asia is here to stay.  0.125% per annum in interest payment from savings accounts in Singapore banks will erode your wealth:



Related post:
Grow your wealth and beat inflation.

Marc Faber is right again.

"More quantitative easing by the US Fed in September or October", Faber predicted in July, 2010:



It seems that Dr. Doom is right again and it is probably good news for equities:



The Fed "will do all that it can" to support the economy, he said, including "provide additional monetary accommodation through unconventional measures if its proves necessary."

At the top of Bernanke's ‘tool box' are "additional purchases of longer-term securities," including Treasuries and mortgage-backed securities. 

Posted Aug 27, 2010 01:35pm EDT by Aaron Task


Oh, stay away from long term US Government Bonds and buy some gold and silver (Marc Faber on CNBC, 16 Aug 10):




Related post:
Marc Faber: S&P will not fall below 1,010.
Gold: To buy or not to buy.

Marc Faber: S&P will not fall below 1,010.

 "If you are very bearish about the world long term, you would probably be better off in equities than in bonds." Marc Faber, 3 August 2010.

Some views from Marc and Jim.

Marc Faber thinks that the Fed would embark on more quantitative easing (aka print more money) in September or October:



Jim Rogers says to buy silver as it is 70% below its all time high:



Jim Rogers also mentioned that sugar is a good investment because a lot of it is being used in the production of alternative fuel.  Now, with the US limiting offshore drilling for crude oil, shortages might develop and that could mean higher crude oil prices in future.  I would keep an eye on CPO price which has been recovering strongly lately.  That affects CPO counters like Golden Agriculture.

Related posts:
Gold or silver?
Why Golden Agriculture?

Do not fear the selldown.

It is safe to say that there is a lot of fear in the air. Palpable? Almost. What are we to do? Well, I am sure everyone has his or her own opinion as to the best strategy in such a situation.  Maybe, I shouldn't be so sure. So, what do I think? Well, I have been sharing my thoughts in this blog and what I now think is largely the same as before.

For a stock which is clearly in a downtrend, sell into strength at resistance.  It might be a lower high but it is still a high.  We don't want to sell at a low.  Then, wait patiently for it to form a base or to rebound and form a higher low.  It would be safer to take up a long position then.

Not all stocks are in a downtrend.  For stocks of businesses with strong fundamentals with their uptrends still intact, buying at supports is still the way to go. Look to the technicals for possible negative divergence as a warning sign.  Certain stocks might be rangebound and if the businesses have strong fundamentals, buying at the support of the trading range is what I would do.

Generally, our motivations for being in the stock market would determine the strategy that we adopt.  For me, I am primarily in the stock market to secure a passive income stream.  So, I would accumulate stocks with strong fundamentals which provide high yields. Examples are AIMS AMP Capital Industrial REIT, LMIR, Saizen REIT and SPH.

I also invest in growth stocks but these are generally not known for big dividend payouts and I invest in these with a view to trade.  Examples are Golden Agriculure and Healthway Medical.  Recently, I tried my hands at CapitaMalls Asia and lost some money, if you remember.

Do I think we are having a meltdown? Are we going into another recession or even a depression? I don't think so. Informed by Jim Rogers and Marc Faber, I have talked about the next crisis being a currency crisis and we are seeing the precursors of that crisis.  For now, I believe that the stock market will be going higher in time. Fiat currencies are not going to do a disappearing act.  Governments around the world will not allow a collapse.  So, in crises, we find opportunities.

There would be some people who want to sell away all their shares now, fearing a meltdown, keep their cash and wait.  There would also be those who are keeping all their shares, believing them to be good investments, and would be buying more shares at lower prices to average down.  In both instances, I would say, look to the technicals as we want to avoid selling at the lows or buying at resistance. We should not be afraid but we should stay cautious. Good luck to us all.

Related posts:
What are investors to do in downtrend?
A correction? An opportunity.

Gold at US$1,210 an ounce.

I started buying gold bullion coins in March/April 2009, believing that it is a hard currency that has intrinsic value unlike fiat currencies which are flawed.  Jim Rogers and Marc Faber have greatly influenced the way I look at current day world economics and I take their views to heart.

When I started this blog last Christmas Eve, one of my first posts was on the subject of gold. The last time I bought some gold bullion coins was in March this year and I gave one to my dad for his birthday and I just gave one to my mom for Mothers' Day. Last year, I gave each member of my family a gold coin as well and the value of those coins have gone up quite a bit by now.

I strongly believe that we need some hard currencies as a hedge against fiat currencies and inflationary pressures. Physical gold is the most accessible precious metal in Singapore at a "fair" price. There are issues but it's a lot better than the situation with physical silver, for example.

I continue to believe that every person should have some physical gold as a long term hedge against all other forms of investments and cash. This could be gold jewelry as well for people who do not like the idea of buying gold coins just for keeps, but, of course, we would be paying for workmanship and wastage in such instances. Some would buy gold coins with commemorative messages and we would be paying a higher price for numismatic value in such instances.  For me, I still prefer the boring 1oz Canadian Maple Leaf as I buy gold for its intrinsic value.

Gold closed at US$1,210 an ounce on Friday. Translated, to buy a 1oz gold bullion coin at UOB now, we would have to pay about S$1,880.  This compared to when I first started buying last year at about S$1,400 an ounce, the numbers speak for themselves. Check gold and silver prices at UOB.

Of course, gold price will not move up in a straight line.  Prices almost never do.  I would look out for dips and corrections to buy more gold.

I will also be looking out for opportunities to increase my exposure to silver as I believe that it is undervalued when compared to gold.

Related posts:
Gold: to buy or not to buy?
Gold or silver?

Two great minds on Greece and gold.

I found these clips of recent separate interviews with Marc Faber and Jim Rogers as they shared their views on Greece and gold.  Make good sense, as usual.

5 March 2010
Marc Faber on CNBC - Greece and gold.



26 March 2010
Jim Rogers on CNBC - Greece and gold.





Related posts:
Gold as an insurance against inflation.
Gold or silver.
Real value of gold.

Saizen REIT: A symmetrical triangle?

On 23 Feb, I had a post titled: "Saizen REIT: Obvious uptrend."  In that post, I said, "... given the trend of the longer term MAs, the downside is very limited from current levels. Any upward push in price will meet with initial resistance at 17c and if this is overcome, the recent high of 18c might be tested..."

Well, the initial resistance of 17c was not overcome.  In the last session, Saizen REIT closed at 16.5c after touching a low of 16c, forming a dragonfly doji. OBV is flat which suggests a lack of significant distribution or accumulation.  The MFI has dipped into oversold territory.  MACD's sell signal has not been reversed.  Lethargy is a signature of Saizen REIT's price action.

I have drawn a trendline resistance connecting recent highs and a trendline support connecting recent lows.  What looks like a symmetrical triangle took shape with its apex sometime in April.  Symmetrical triangles are not the most reliable patterns in charting but, if valid, a price action in the prevailing trend is not far off.  In this case, the trend is UP.  The ascending MAs make this quite obvious.

My decision to accumulate Saizen REIT from 13c to the current price is informed by a thorough FA with the understanding that it is terribly undervalued. Even if the REIT's portfolio of YK Shintoku were to be foreclosed and even after all the warrants are converted into regular units, Saizen REIT would still have a NAV of 29c per unit. At 16.5c, it is still a good 43% discount to NAV. I have blogged about this quite extensively and shan't dwell on the fundamentals too much in this post but I will say this again, "Think contrarian!"

A video interview with Marc Faber (Posted Mar 12, 2010 07:30am EST by Peter Gorenstein):



"If you are going to put money to work in stocks both market watchers think Japan is the place to be. After a 20 year bear market and despite high-debt-to-GDP levels, the pair think the market has become too cheap to ignore. Always a contrarian, Faber believes the lack of interest in Japanese stocks makes it one of the most compelling buys in the world. "

Related posts:
Saizen REIT: Obvious uptrend.
Passive income with high-yields: Saizen REIT.
Japan's debt issue and Saizen REIT.

Grow your wealth and beat inflation

In some interviews earlier in the year, Marc Faber said that the meteoric rise in global stock markets in 2009 was a once in a lifetime opportunity to make a lot of money and that 2010 should be a year of capital preservation (ie. not to lose money). Marc also said that, on average, it is still possible to get about 10% gain from the stockmarket this year.

People who know me would know that I have a lot of respect for Marc and I take his advice to heart. However, I believe that if we use fundamental analysis and choose to invest in companies with strong fundamentals that are still below their intrinsic value, coupled with technical analysis to determine fair entry and exit points, we could make more than 10% capital gain this year.
Stockmarket analysts.

Does this mean that we have to take on risk? Of course, there are risks involved. There is no free lunch in this world. Risk has to be managed, not feared. Easier said than done? After all, it's only human to feel fear.
Risks and rewards: TA and FA

Then, let this be an inspiration: "The rich would act in spite of fear. The poor would let fear stop them." I read this in a book while browsing in a bookshop recently. I cannot remember the title now. If we are petrified by fear, we would never do anything in times of adversity.  At the height of the bear market when the VIX was making new highs, when everyone was fearful of buying more shares, that would have been the best time to gradually accumulate shares of good companies.
Bungee jumping, anyone?

Convinced?  So, what do we do?  There are many suggestions by financial analysts on what to do with your money depending on your risk appetite and how to get better returns than fixed deposits in the banks. Frankly, to get better returns than fixed deposits is quite easy. A one year fixed deposit now pays as much as 0.8% per annum, the last time I check. There are also suggestions to leave our money in money market funds which pay 1.3% per annum, thereabouts. Lower risk than equities and higher returns than fixed deposits, though not guaranteed.

For me, the more important thing is how to get better returns that will protect us from the wealth erosion effect of inflation! A rather benign inflation rate could be about 3% per annum. So, if we leave our money in the bank, more than the contingency cash required for six months of expenses in case our regular source of income is terminated, we are doing ourselves a grave injustice with an interest of only 0.125% per annum in the banks. If we leave our money in a fixed deposit or a money market fund, our wealth is still shrinking as the returns lag inflation.
Be a pragmatist and prosper in 2010.

I wrote about capital gains and high yields in various articles in this blog.  I have shared my thoughts on inflation and investments in gold and real estate too.  On a daily basis, barring the days I'm away from home, I've shared my analyses on price movements of certain counters.  These analyses would hopefully contribute to capital gains.  It seems that I'm neglecting high yields.  After all, the theme of my blog is: "Have a more secure financial future in an uncertain world by creating a stream of reliable passive income with high yields." 
High yield portfolio.
Real estate as hedge against inflation.
Gold as an insurance against inflation.

I guess why I'm not writing as much about high yields is because they don't really have to be actively managed as much.  I am receiving dividends from a portfolio of high yields at this time on a quarterly, half-yearly and yearly basis, depending on the stock.  This is something which people who are relatively risk averse, who want to grow their wealth, fearing the effects of inflation could consider.

My portfolio of high yields at this moment include:
SPH
ST Engineering
Cambridge Industrial Trust
CitySpring
First REIT
FSL Trust
K-REIT
LMIR
AIMS AMP Cap Ind REIT
MIIF
Suntec REIT
HWT
Frasers Commercial Trust
Saizen REIT

These high yields are not all created equal and some were bought at prices I would rather forget.  Many, however, I am happy to say, I have purchased at much lower prices in the last twelve months.  The constant passive income they have provided me with makes me happier.

The profits I made from trading in the stockmarket, I make it a point to apportion some of it towards accumulating high yields.  The high yields I have been accumulating in the last few months were SPH, AIMS AMP Cap Ind REIT and Saizen REIT.  I have written extensively about these high yields.  So, I shan't say more here.
Passive income with high yields - Saizen REIT.
AIMS AMP Cap Ind REIT.
 
We have a responsibility to ourselves and the people we care for to have a secure financial future.  This is something we have to consciously work towards.  It is the responsible thing to do.  The journey is likely to be filled with obstacles but treat each one as a learning experience and grow with each step.  A good dose of luck doesn't hurt as well.  Good luck to us all.

Rationale for partial divestment

Amongst the three counters I am actively monitoring, I remain heavily vested in only one counter: Saizen REIT. I have divested 90% of my position in Golden Agriculture and 80% of my position in Healthway Medical in the recent run up in prices.

From 4 Jan, the first trading day of 2010, Golden Agriculture raced from 51c to a high of 65.5c for a gain of 14.5c or 28%. Healthway Medical blasted through the roof as it started the year at 14c and hit 19.5c for a gain of 5.5c or 39%! In both instances, partial divestments took place at every resistance level as the prices rose.

Now, have I changed my mind about these two counters? No, of course not. The fundamentals and prospects are still good over the longer term. I just feel that the market became a little too enthusiastic and sent prices up too high and too quickly. I liken it to a sprinter who is able to run very quickly over short distances but the speed is unsustainable over longer distances.

Knowing which companies' shares to buy and when to buy them is important but knowing when to sell the shares is equally important. For sure, if we simply hold on to the shares till they reach the zenith before selling is one way. However, to grow our wealth more quickly, selling at resistance levels and repurchasing at supports for the next leg up could be more rewarding. It is with that mentality that I partially divested my shares of Golden Agriculture and Healthway Medical.

What about Saizen REIT? It started the year at 15c and reached a high of 18c for a gain of 3c or 20%. Not too mean either. I identified Saizen REIT as a yield counter for regular passive income. Conservatively, I expect a yield in excess of 10% per annum from middle of 2010. With that in mind, I am not too keen on divesting my investment in Saizen REIT unless the price is extremely compelling. Three portfolios and three counters: future gains and passive income.

The stock market climbs a wall of worries and goes down a river of hope or so the saying goes. Basically, it means that prices do not go up or down in straight lines. If the prices go up without a break, it means that the wall of worries is non-existent. I would worry in such an instance! It usually means that the market is euphoric and we have buyers rushing in en masse.

When we have almost full participation in the market, there is very little fuel left to push it higher. That is when the market reverts to the mean. Anytime, when too many people shift to one side of the boat, a shift back to the other side is necessary to maintain equilibrium.

In an article I read this morning by ETF Guide, it says,"Investors Intelligence tracks the recommendation of different market advisors. As of the most recent poll, 53.4% of all advisors are bullish. 30.7% of advisors are longer term bullish...... " It went on to say that even the market high of October 2007 did not get such a positive response. This is a wake up call and contrarians are taking note. Marc Faber is probably one of the first to sound the warning and I talked about this in a post yesterday: STI: Up or down?

Right, this is where I sign off. I will be going away for a short holiday from tomorrow and will not be adding new posts for a few days. Thanks for the overwhelming support so far and I hope my posts have been useful and in some cases, maybe, inspiring. I wish everyone the best of luck and, remember, always hedge and come back often.

STI: Up or down?

Looking into crystal balls can be hazardous to health because they give you signs of what might be and not what will be. Usually cryptic and sometimes perverse, it's best to avoid these magical objects. However, being human, I have the failings of our kind, the type of failings which got us kicked out of Paradise in the first instance.

In a post dated 12 Jan, I wondered if a correction was at hand and on 13 Jan, it looked as if a correction was underway. For a recap, please seeConfirming the signs. However, on 14 Jan, things did a u-turn and that got people wondering if there would be more upside to come.

To me, the recent ups and downs of the STI is a sign that a correction is probably going to happen. A 3000 points initial target which so many analysts have talked about is so near and yet so far. The market is grudging and unwilling to give bulls the satisfaction (yet). Analysts have also talked about a 3300 points eventual target for the STI by end 2010. That's a mere 10% from where we are now.

Marc Faber, in an interview with Yahoo! Finance on 13 Jan said that he is no longer bullish on stocks because everyone is now bullish on stocks. Marc is a shrewd contrarian who has been proven right time and time again. He made the observation that many stocks' prices are flattening out and that once the momentum fizzles out, momentum players who are in the market for the upward momentum and not to hold long term positions, will pull out and they will pull out fast! We will then have a correction in earnest. It would be prudent for us to take Marc's views seriously.

What are we to do? I suggest keeping an eye on the newsflow and on the STI at the same time for signs.

During the recent multi-months recovery from the market bottom, we saw how streams of bad news were brushed aside as the market powered upwards. That was a powerful sign that a cyclical bull was charging back. It was a sign which many ignored much to their regret later on. At best, disbelievers missed out on a money making opportunity of a lifetime. At worst, shortists were caught with their pants down and lost their pants in the process (and some even got spanked on their backsides).

If we get a constant stream of positive newsflow and the STI hardly budges but a slight whiff of negative news sends it down, the signs are clear: a correction is not far away.

A saying from Warren Buffet now rings clear in my mind: Be fearful when others are greedy! That is a generalisation like many of his sayings. It serves to inform and not to instruct. That's where many would be Buffets got it wrong. They think his sayings are instructions.

Personally, I believe in being a pragmatist and not being overly bullish or bearish. I believe in hedging. I have taken some profit off the table, leaving some long positions in the market in case it decides to go higher. After all, crystal balls reveal only part of the picture, leaving us to form our own conclusions and, usually, we see what we want to see.

Video added on 11 Feb 2010:

Real estate as a hedge against inflation

For the last year or more, I kept hearing and reading the word "deleveraging". Companies and individuals are all busy deleveraging. So, basically, people are saving more money, paying off their debts and spending less. Overall, it gives an impression that leveraging is undesirable and should be done away with.

Marc Faber famously said that, in Asia, the family run businesses in Hong Kong and Singapore have very little debt. Many rich families in Singapore don't have any mortgages. He thinks that Asian real estate will continue to do well. This gels with what Jim Rogers thinks about how we should own some real estate and he, in a recent interview in New York, actually said that he would buy some US real estate now if he were staying there.

In my posts on the subject of gold, I mentioned that I buy gold as a hedge against inflation and that I do not trade gold. We could also buy other tangible assets which would keep pace with or grow faster than inflation and protect or grow our wealth in the process. However, most of us are not in the same league as Marc Faber or the rich families he mentioned.

So, what are we to do if we want a piece of the action and own some Asian real estate? Do we work very hard to save money before we buy that piece of real estate? 100% cash upfront and without a housing loan? Or do we put down 20% and borrow 80%?

Quite simply, like any other investment, the answer lies in timing. Buy when the market is depressed or just turning up and hold for the long term. If you believe that the world is going to see extraordinary inflation in future, this is one thing we should do if we have the means. If we have the money, pay 100% cash upfront. If we only have 20% to <100% of the value, take a housing loan for the balance. As an example, I bought private real estate 6 years ago and took a loan for 80% of the price. The valuation is now 80% higher. If I were to rent it out, I would realise a yield of 7% p.a. This is much higher than the interest rate on the bank loan I'm servicing. Capital appreciation plus steady passive income. Sounds like a high yield stock? Sure does. Having said this, we have to keep an eye on the interest rates. If that goes up significantly and we do not have the means to pare down the outstanding loan amount drastically, it might be time to let go. If I had told myself 6 years ago that I should work harder and save more money before taking the plunge, I would have worked harder, saved more money but ended up poorer. The next time the property market has a correction in price, bear this in mind and take the plunge, if you have not done so already. Inflation is a powerful force. If we have the means, we must do all we can to protect ourselves against it. Buy Japanese real estate

Buy Japanese real estate

Marc Faber has been bullish on Japan for some time and recently in an interview with The Economic Times, he said, "I think as a contrarian, you really want the contrarian play. You should buy Japanese stocks and Japanese banks. This is the absolute contrarian play. Nobody is interested in Japan, all the funds have withdrawn money from Japan, they have given up on Japan."

Japanese real estate peaked in early 1991 and has been on a decline since. Believe it or not, the price of real estate in the 6 biggest cities in Japan have fallen by 50% or more while the decline in other parts of Japan is around 30%. Imagine buying a piece of real estate and almost 20 years later, you find that it's worth 50% less in NOMINAL terms. Imagine what's the REAL value lost. No wonder many Japanese do not want to buy real estate. However, it's precisely when everyone is so bearish that we should be interested.

Japanese land price fell from 1991 to 2005 unabated and rose in 2006 and 2007 before falling again. The Japanese real estate market is oversold and unloved. However, with Japan coming out of a recession and optimism returning, things are set to improve. If you could visualise this graphically, we might be getting a classic double bottom pattern!

From an article in Property Wire on 30 May 09:
There is growing speculation the Japanese property market has bottomed out with analysts forecasting an improvement in the economy. Credit Suisse Group AG said that property manager Nomura Real Estate Holdings operations are improving. Analysts said that the company's condominium, investment and brokerage operations are outperforming expectations.

From another article on 19 Jun 09:
The property market in Tokyo is set to rebound as easier credit and low prices entice overseas investors back to the Japanese capital, according to a leading banker. Kazuo Tanabe, president of Chuo Mitsui Trust Holdings, Japan's sixth largest bank, said that foreign buyers are showing a lot of interest in acquiring Japanese property. 'We are seeing more deals as prices bottom out and investors think that it's time to buy,' he said. Property transactions being negotiated now are up as much as 30% from last year, added Tanabe, as Japanese firms and individuals also seek to buy.

From an article on 18 Jul 09:
Giant investment funds are poised to start buying Japanese property in the first half of next year when prices are expected to be at rock bottom, it is claimed. Global investors including Carlyle Group, Blackstone Group and Lone Star Funds are still waiting for prices to drop a bit further, according to Ben Duncan, managing director of CB Richard Ellis Japan. 'The market is steering toward big, opportunistic funds. They're waiting for prices to fall further. At the moment they are not seeing as much distress as they hope for. But as the market starts to bottom out they'll probably start to buy,' he explained.

We have a chance to own Japanese real estate in Singapore at a bargain too. Yes, you guessed it, buy units in Saizen REIT! Buying Japanese real estate at this time is attractive because we are buying real estate with more than decent rental income on the cheap. Well, it's not as cheap as it was earlier this year but things are a lot clearer and there is much less risk now.

Although rents have declined since 1995, property prices dropped at a faster pace in the same period. From 1995 to 2008, rents fell by 11.2% while property prices slid 35%, according to JREI. With property prices falling, young people tend to prefer renting, while individuals migrating to urban areas from rural areas create another source of rental demand. (Source: Global Property Guide, 22 Oct 09)
Passive income with high yields: Saizen REIT