Stock markets worldwide are finally being smashed. The US Fed just announced a further USD10 billion cut in QE, which means that they print USD65 billion of money per month! Like a vacuum cleaner, the Fed's action sucks money from various countries, especially those that are poorly managed; with large current account deficits, small foreign reserves and large fiscal deficits. Countries like Turkey, India, Indonesia, and Brazil come to mind.
This could be a huge correction of 10 - 25% worldwide. To me, it's an opportunity to buy more, but when it gets cheaper. Whether with stocks or properties, the rules are the same:
1. Buy below market value, or buy when stocks are cheaper than median. We could see stocks falling below median levels again. S&P500 is at around 17x historical now and 15.4x forward. Should there be a 15% correction, we could see it falling to 15x historical and 13.3x forward. It would be cheap again to buy.
2. Cashflow and yields are important. Every property that I buy must take care of itself. It must either be slightly cashflow negative or neutral at least. Dividend yields / earnings yields from stocks should ideally be over 3% more than 10-year govt bond yield
3. Future development, or potential positive developments. There should be something to look forward to, whether be it a future CrossRail Station, or a Westfield coming up nearby. Stocks should have some positive developments in future, e.g. Metro which owns several real estate and could pump the assets into a REIT in future.
No comments:
Post a Comment