Cash

I've tried to win this argument before - unsuccessfully - that "cash" is a significant enough concept that it should be a "first class citizen" in an investing model.  Finally, I found the words that I wanted, from an interview at Gold Money Research with Detlev Schlichter:

At any moment in time you can hold your wealth in three forms: consumption goods, investment goods or money. With money you can stay on the sidelines, you keep your purchasing power and stay ready to buy consumption and investment goods in the future.

They key point here is that "cash" - and I'm using that term, in this context, interchangeably with "money", does have the special power of enabling you to stay on the sidelines, while all other investments may be struck by volatility, cash's purchasing power will remain constant (in the short term) to consumer goods, and independent of the volatility of the investment goods.

Property buyers advocate nails investing rules

Enough people have already written about what a flop The Block was, but the article that drew my attention was the one entitled: Eight property rules broken by The Block, by Mal James, from James Buyers Advocates.

He lists the following property investment rules:

Rule No. 1: You make your money when you buy.
Rule No. 2: Buy the best position you can
Rule No. 3: Consider your target market, before you start.
Rule No. 4: Don't overcapitalise
Rule No. 5: Amateurs don't make money on renovations - they make money because they are lucky that the market happens to be in an upwards phase.
Rule No. 6: Don't think short term with property unless you like excessive risk.
Rule No. 7: Choose local selling agents who are experienced at your price range, and choose ones that can deal outside the auction process.
Rule No. 8: Substance v puffery

I couldn't help but immediately see parallels between James' property investment rules and my own value investing rules.

House prices (don't) always go up

At least, Melbourne house prices don't always go up.

From here: http://www.macrobusiness.com.au/wp-content/uploads/2011/08/image002-11.png we get monthly Melbourne house price changes: -1.2, -1.6, -1.8, -1.2, -2.1, -2.1, -2.7. 

That adds up to a whopping -12% for the first 7 months of 2011, some of which we have to account for normal winter seasonality. 

Share Prices - Significant factors affecting

I've recently had a go at trying to determine the most significant factors affecting prices of houses and gold and silver, but now it's time to tackle the difficult one - share prices.

One of the things that makes it difficult is that it's a different answer depending on whether we are talking about an individual company verses an equity index (eg. ASX All Ords).

Let's start with what appears to be the most obvious answer - profitability.  The most significant factor affecting the share price of an individual company, and perhaps even the indexes, are their profitability.  In general, the more profitable companies are, the higher price they can command.

Sniper pulls the trigger

A friend and colleague recently described my investing strategy back to me as sniping. I had chosen my target companies, and for each one of them I had identified a target price.  The cross-hairs were set and I was ready.  The trigger finger was not particularly twitchy, but it was ready to fire the moment that something appeared in the sights.

Anyway, I recently went traveling, and so was pretty much off line for about a month.  Knowing that this was  going to be the case, I decided that I'd put in some low-ball buy orders on the market before I went, just in case a stock market crash occurred while I was away.  I won't be so bold as to say that that was a prediction - well - the crash was, but not the timing.

July Consumer Metrics data

I've long been a fan of the Comsumer Metrics Institute. They've been showing the US consumer "double dip" recession for well over a year now - yet the official numbers have only just been "adjusted" to reflect this.

Looking at the latest data, it is surprising to see an uptick that may indicate the end of the contraction.

Perhaps there is light at the end of the tunnel. Time will tell. The Consumer Metrics Institute will probably give a leading indicator either way..

Antal Fekete

Fekete's articles - an interesting read on gold, futures, and what the USD end game might look like.

Gold and Silver prices - Significant factors affecting

Following on from my look at the most significant factors affecting house prices, I would now like to take a look at the gold and silver, and the factors that most affect their prices.  (Update: See also: significant factors affecting share prices).

Like with house prices, I'm trying to determine what has the largest impact on their price over the long term, rather than the factors that cause their volatility, as I'm long term investor.

I don't claim to be an expert on the precious metals, but that's never stopped me from having an investment opinion before, so here goes.

House Prices - Significant Factors

My plan is to make this a multi-part series, where I take a look at various classes of assets, and the most significant factors that determine or influence their prices.  Today I'll look at house prices.  Later, I'll take a look at stock market share prices (Update: See here), and I also hope to take a look at gold and silver prices at some stage as well (Update: See here).

So, what are the factors that affect house prices, in order of significance?  As an investor, and as a potential home owner, understanding these factors are crucial to making a sensible and profitable investment decision,  yet the answers far from clear, and rarely understood.  Here's my take on it.