Major, Regarding your example (two bank accounts), i think you are misrepresenting my original post. I already mentioned how much we had in each bank account at the begining and the end of the year. In this particular instance it was not necessary to calculate the percentage change as the XPJ now is less than it was on 1 Jan 2009 (it made a loss) while other sectors made gains (regardless how much the gain was)! So its very easy to conclude that XPJ has under performed the rest of the market without the need to calculate the percentage change!!!
In relation to the banks and the margins, as you said it depends on competition between banks, and as you know market conditions always change! so the current profit margins are temporary because of the bad economic situation and because of the relatively low interest rates. Once things get back to normal, competition between banks will increase and profit margins will fall again. On the other hand, REITs are also in control and they can increase their profit margins by increasing their rent/fees! Prices are floated and nothing can stop them to enhancing their operational profits once the market conditions allow them to do so!
Let us remember that there will be an inevitable hyper inflation following the GFC because of the massive amount of cash pumped into the markets (stimulus packages)and property prices will sky rocket as a result of this coming inflation(which will allow them to borrow more money to stimulate growth).
Why did you assume that the current gearing level will be a permenant thing? I agree with you that REITs wont borrow in the same crazy way as before, but when the economy recover they will definitly be able to borrow more money than the current levels and this is why the government is supporting the banking sector, to encourage bank to lend more!
Why did you assume that borrowing is the only way to acheive profit and growth??!! There are many other ways for businesses to fund their activities and grow such as the application of strategic alliace, or by investing a part of the operational profit.
"The materials and mining sectors have a bright future". REITs have a brighter future in my opinion. The world population is expected to reach 9 billion by 2040!! In addition, global warming is expected to cause a massive number of people to come to Australia as "enviromental refugees"! Just consider the impact of these two event on the property prices in the future!
Finally, i agree with you that FKP will fire up sooner or later, what i still dont understand is why its still trading at the current dirt cheap price! (market irrationality is my answer)
FKP Price at posting:
57.0¢ Sentiment: Buy Disclosure: Held