Following on from my previous post which provided a bit of a compare and contrast or holistic analysis of the overall market to come to a conclusion of the value in Telstra I thought I might add some further observations in an attempt to bring some logic to light and perhaps make tls investors very comfortable with their holding.
What im seeing is a ridiculous unjustified rally in iron ore, I feel this is basically just a really speculative outlook on the supply and demand curve of iron ore. This speculation is driven by the Chinese and hence they are stockpiling. Nothing has changed fundamentally its all typical herd mentality and the old FOMO effect.
In my time building and developing property I have made several visits to china for importing purposes, consequently I have some experience in the business culture and the mind sets of the Chinese. Don’t get me wrong I have several good friends that are Asian, but in my own personal experience I have made the following observations.
The Chinese are probably up there with the world’s best at speculating, gambling and falling victim to the FOMO effect and fear and greed mentality. Visualise the Boxing Day sales at the likes of Myer, thousands of people awaiting the doors to open with no concern to the fact that they will be stampeded to death. Well multiply this by millions and you have the irrationality that exists and creates ridiculous swings in the price of commodities. What point am I trying to make you ask, well it’s very simple it creates extreme volatility, this volatility will see iron ore prices eventually fizzle off. A few will start and then the herd will follow and we will possibly see a similar effect on the downside.
When the price fizzles off money will move, I actually think the tls div coming in the next few months is timed perfectly within the context of this volatile market, trump not in until end of January then time for him to get his feet, so there is not going to be any change in policy or infrastructure spend anytime soon, basically nothing of any substance will be announced for some time so the crazy unpredictable stock swings will be here to stay. Whilst this is all happening one thing is almost certain, if you’re in Telstra you will see a near 10% grossed up dividend throughout these crazy times. So with div due about end of February if you buy now at these sp levels, even if you bought above 5 bucks you’re almost guaranteed a 4-5% return on your money in less than 3-4 months, not too bad at all.
Also some banks gone x div last few days, so there may perhaps be some movement of funds out of the banks into other yield plays like tls, also there will be some serious amount of extra cash sitting out there after bank investors have been paid their dividend which may find its way into tls.
yes the miners pay a div at a similar time to Telstra, however all miners are doing lately are cutting dividends, oh wait a minute the likes of wow will also pay dividends at similar time to tls, ohh that’s right they are also shredding their dividend payments lately.
Crazy punter you make a very valid point about property in your recent post, in summary my 20 plus years’ experience with property brings me to the conclusion that at this current moment in time the property market is a mugs game. Sorry to those that have recently bought rental investments or bought years ago at a premium, but these are the cold hard facts. No catalysts exist for property prices to appreciate and no catalysts for rental yields to increase in WA any time soon, so money in property is dead money at the minute. The Likes of Sydney and Melbourne well as I’ve stated before, a bubble that’s close to bursting all created as a result of my Chinese FOMO analogy explained above.
Consequently the last 2 years I’ve been moving all my funds into a small group of top 20 stocks with probably far greater success than I’ve ever experienced in the property game. I’ve always dabbled in the share markets however I’ve always had say a 80/20 weighting in favour of property. In hind sight my shear passion for property has probably been to my detriment. Like you have stated crazy in your recent post, the shear stress of property as opposed to shares is monumental.
Here’s a very quick compare and contrast for the lay person, as it’s impossible to expel 20 plus years of experience in a concise manner. Within the context of developments the stress is relentless the days are probably 10-12 hr days minimum, the number of regulatory agencies you spend months fighting with and the red tape is just completely illogical, local shires, planning commission, building commission, water corp, financial institutions, neighbouring property owners, insurance companies, engineers, lawyers, architects, accountants, real estate agents, property managers copious amount of tradesmen and material suppliers etc etc. Add to that theft, vandalism and illegal dumping on your construction/development sites.
Oh but wait I can be a passive property investor and head down to the beach every day and collect my rent. Like you mentioned crazy just dealing with the day to day shenanigans of tenants, incompetent property managers that don’t give a sheet about your property in my experience is rather stressful and just not worth the money. What I found was I was equity rich and cash poor, all I was doing was providing a roof over the head of people that treated my homes like sheet, keeping property managers employed that didn’t want to be there, paying the interest on my debt keeping the banks happy, visiting a magistrates court frequently to deal with tenants being wankers for a judge to side with the poor hard done by tenant that can’t afford to buy a home. Stuff that, and this is the very reason that investors are piling out of WA property, because people are sick of trying to self-fund their retirement via property while getting bent over and you know the rest. It’s also the reason public housing waiting lists are at crisis levels, because private investors have seen the light.
Don’t get me wrong im not saying property is all doom and gloom, as I have made some good money from it over the years, the point im trying to present is that the days of easy and quick money in property are predominately gone, and even if your do make money the stress, risk and physical exertion, time away from family and so on that is present is just not worth it when there are so many better places to put your money, or even better places to put lent money at record low rates. The share market being one of them and no brainer stocks like Telstra, specifically which at current sp levels can return a yield of near 10% PA and possibly in the next few months a capital growth yield of an additional 5% plus leading up to that dividend. And what effect and stress is there in comparison to say the property path, well it’s as hard as pressing a button on my computer.
I can’t believe how happier I am these days, and how much extra time I have to spend with the kids and pursue my own hobbies/interests now that I have a 100% weighting in the share markets and specifically blue-chip stocks.
In addition one thing you got to love about the share markets is its Liquidity, damn site easier pressing a button on my computer to get my cash back than trying to sell say a 2 million dollar property development in one of the worst WA property markets that I’ve seen in over 20 years.
I mean in a matter of minutes I can move from say rio to cba to tls and back again, yet my last property development took some 11 months to sell, dwellings sitting there returning no revenue, the scary thing was they were only a 6 minute drive to the Perth cbd. The only winner was the bank manager out of that transaction. It’s pretty damn worrying when you can’t sell brand new homes a few kms from the city with record low interest rates.
So what am I trying to say, well it’s just about putting your investment decisions into perspective, the amount of physical effort you have to expel for a return on your money and also timing is everything, pick the right investment at the correct time and this I feel comes with the tacit knowledge that we develop of years of actual real life experience and combining that with a bit of book smarts, so a combo of street. smarts and book smarts will often allow logic to prevail. Sheet I wish someone taught me this sheet 25 years ago so I could have retired at 30, lol.
Based on that it’s far far too early to be making investment decision based on the speculative trump effect. The safe, responsible and logical thing to do is sit in a top 20 stock like Telstra at least until the divvy is paid and then just reassess your situation from there.
Don’t lose sight at the absolute monumental levels of indebtedness all around the world, which to me says interest rates are certainly not going up in any hurry whatsoever and hence nor will bond yields, based on that I’m pretty damn comfortable still chasing the yield plays for several years to come, and Telstra is up there with the best of them.
So to all holders don’t stress, kick back and enjoy the divvy and the hopeful rally moving into the divvy. To people thinking about buying tls to get a return on you money I wouldn’t procrastinate too much as you may miss it, plus really, there are not too many other better places to put your money at the minute. As I’ve tried to explain based on my own experiences, property in my opinion is out of the question and as per my previous compare and contrast post several of the top 20/50 are also out of the question
So in closing don’t stress, I say again don’t stress you could have your money in a lot worse situations. Hopeful sharing my experiences and opinions has gone some way in helping tls holders in feeling a bit more comfortable in their share holding at this volatile time.
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