Markets in Asia have rebounded strongly since the sell off last week. So have commodity prices. By way of example silver has jumped from US$9.72 per ounce on 14 June to US$11.12 at the time of writing.
I am kicking myself for not taking advantage of the opportunity to buy some assets and kicking myself twice over for letting myself be so easily influenced by short term market movements and indulging in "should have" retrospective thinking. I think it is time to add some books on physcology to my reading list.
Monday, July 03, 2006
Sunday, July 02, 2006
No interest rate rises here!
Hong Kong banks did not follow the Federal Reserve in raising interest rates this week. Given that the vast majority of mortgage debt in Hong Kong is at floating rates this is good news for me and good news for the the property market.
The previous increase in interest rates by the Federal Reserve also failed to have a follow through effect on interest rates in Hong Kong. Given that the Hong Kong dollar is pegged to the US dollar, I have to question whether the emerging yield gap between deposit and lending rates for Hong Kong dollars and those for US dollars is sustainable? My conclusion is that at this time Hong Kong does not need higher interest rates because:
1.Hong Kong's economy is still booming but shows no signs of over heating;
2. while property prices and the share market have had a good run over the last three years, there is nothing that could be described as a bubble;
3. Hong Kong as a whole is a very liquid economy and one that is not highly leveraged (either at the corporate level or the individual level). The laws of supply and demand currently favour of the borrower.
For information, while many markets have fixed rate mortgage products, in Hong Kong, fixed rates are less common and, generally, quite expensive.
The previous increase in interest rates by the Federal Reserve also failed to have a follow through effect on interest rates in Hong Kong. Given that the Hong Kong dollar is pegged to the US dollar, I have to question whether the emerging yield gap between deposit and lending rates for Hong Kong dollars and those for US dollars is sustainable? My conclusion is that at this time Hong Kong does not need higher interest rates because:
1.Hong Kong's economy is still booming but shows no signs of over heating;
2. while property prices and the share market have had a good run over the last three years, there is nothing that could be described as a bubble;
3. Hong Kong as a whole is a very liquid economy and one that is not highly leveraged (either at the corporate level or the individual level). The laws of supply and demand currently favour of the borrower.
For information, while many markets have fixed rate mortgage products, in Hong Kong, fixed rates are less common and, generally, quite expensive.
Thursday, June 29, 2006
What's next?
What should I invest in next?
I have just completed the purchase of a residential investment property. I have a modest amount of cash left over and will be back on the savings path again at the end of the month when I get paid on Friday. So I have cash on hand and more cash will become available for investment each month (excepting November and December when I need to put money aside for taxes and our Christmas holiday).
The question is what should I be doing with the money?
The longer term plan is to allocate about half my assets to real estate and half to equities. If it ends up being an unequal split that is not a problem. At present I am over weight real estate and underweight equities.
Preliminary thinking throws up the following choices:
1.save for the deposit on another property. I will need two more small residential properties to achieve the desired real estate component from my retirement portfolio (paying off the mortgages is another matter);
2.increase payments into equity funds. The recent pull back in a number of markets has made these more attractive than they were a few months ago;
3.search for an alternative investments. There are a few options available for retail investors like myself - a limited number of hedge funds, bullion - any others?
4. reduce debt. While the gearing in the real estate portfolio is relatively modest, paying off one of the mortgages with the resulting improvement in cash flow is always tempting;
5. build up some cash. I am not a fan of holding cash for the longer term because of the corrosive effect of inflation but it is a useful parking place for money pending identification of a more constructive use.
No decision as yet. In the short term option 5 (cash build up) is the default option. Beyond the short term this is not a sound choice. I'm starting to feel indecisive which is, itself, not a good sign.
I have just completed the purchase of a residential investment property. I have a modest amount of cash left over and will be back on the savings path again at the end of the month when I get paid on Friday. So I have cash on hand and more cash will become available for investment each month (excepting November and December when I need to put money aside for taxes and our Christmas holiday).
The question is what should I be doing with the money?
The longer term plan is to allocate about half my assets to real estate and half to equities. If it ends up being an unequal split that is not a problem. At present I am over weight real estate and underweight equities.
Preliminary thinking throws up the following choices:
1.save for the deposit on another property. I will need two more small residential properties to achieve the desired real estate component from my retirement portfolio (paying off the mortgages is another matter);
2.increase payments into equity funds. The recent pull back in a number of markets has made these more attractive than they were a few months ago;
3.search for an alternative investments. There are a few options available for retail investors like myself - a limited number of hedge funds, bullion - any others?
4. reduce debt. While the gearing in the real estate portfolio is relatively modest, paying off one of the mortgages with the resulting improvement in cash flow is always tempting;
5. build up some cash. I am not a fan of holding cash for the longer term because of the corrosive effect of inflation but it is a useful parking place for money pending identification of a more constructive use.
No decision as yet. In the short term option 5 (cash build up) is the default option. Beyond the short term this is not a sound choice. I'm starting to feel indecisive which is, itself, not a good sign.
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