The Investing Year Ahead

[UKresonant]

Just now, Mike Lister said:

A lot of very capable thinkers like Burry are predicting another financial crisis, as said in the OP, Blackrock has exited the US markets entirely because of this belief. That's a huge move to take for a firm that size, in the business they are in.

 

I think that value of USD will have a lot to do with what happens, it will also impact expats in Asia because of the exchange rates and Asian economies. A strong Dollar will kill US equities whilst a weak Dollar will stimulate exports and increase demand. But that weak Dollar will also aid EM currencies and EM economies, even if it does make the Baht exchange rate unattractive  to resident expats. Logically, a weaker dollar is  more helpful than not to everyone (except us).   

Don't think BR will be back in until late Q3 

Moving from GPB to USD investments would need to be at 1.35 I think, which it is not, so don't see any attraction. expanded to Japan with the currency ratio seemed less risky even if the index figures were not the incentive to do so.

[spidermike007]

14 hours ago, Yellowtail said:

I would not expect the rate cuts in the US to do much of anything.

 

My biggest concern is that I think it's taking too long for residential real estate in US to correct, and that we'll see another crash. 

Prices are already dropping in many markets, and houses are going unsold for 6 months to a year. I expect the real estate market in the US to drop very significantly over the next three years, it's over inflated to a ridiculous degree. 

 

How will that affect the rest of the economy, what are the chances of a recession, will they be able to tame inflation? That and the ongoing wars around the world are huge variables. 

[Mike Lister]

3 hours ago, UKresonant said:

I think I'm 80% equities

US 37%

UK 20%

EU 14%

JP  12%

       17% PacExJP and many fragments.

 

Got rid of 99.9% of gold March 2022 (giving +14% compared with when when I went in 6 months before, and a corresponding -16% on the Equities it was moved to, just after the obvious Russian wipe-outs became apparent).

 

        

 

At 80% you're being aggressive, I hope you're a young fella or have nerves of steel and a secret stash of cash for a rainy day.

[UKresonant]

2 hours ago, Mike Lister said:

At 80% you're being aggressive, I hope you're a young fella or have nerves of steel and a secret stash of cash for a rainy day.

 

I can be a bit more aggressive on that bit which is providing 22% of my current income stream, but want to improve the numerical yield as target, whilst the percentage yield is reduced in those portfolios, so the numerical escalation becomes increasingly more certain in theory.

 

[They financial advice was to resist the apparently big Money opportunity back in 2018, so quite happy on some one else is worrying on the 69% and the 9% is straight out the Treasury 

Much lower Cash stash, Vs more secure and escalation of income stream. Will have to do until the next segment (probably State pension) arrives in six years (seems so far away at the moment  ) Interestingly (or not) all the DB segments are from the same continuous employment, but I think Thai RD will only accept the 9% as being always taxed in the UK, if I had to file.

Lower cash stash makes the Thai interface more difficult now perhaps, but set in stone and avoids temptation, the advisor was correct I think.]

 

[Some folk that are/were in 'safe' Lifestyle Defined contribution pensions, which had been increasing bonds as a share of the portfolios, as their customers became older, got a bit of a shock when the 'safe' bond prices dipped in to 2023! Can we retire?=No (or get burned.]

 

 

[Foxx]

21 hours ago, Mike Lister said:

Blackrock has exited the US markets entirely

 

Do you have any evidence for that? The only statements I could find were along the lines of:

"BlackRock, the world's largest asset manager, is reallocating assets out of the US economy in preparation for a looming recession and corporate debt bubble, as warned by other investors as well."

 

"Blackrock plans to move a significant portion of their portfolio out of the US and into emerging markets due to concerns about the corporate debt bubble, rising interest rates, and the potential for a looming recession."

In other words, a partial exit, not "entirely".

[Mike Lister]

7 minutes ago, Foxx said:

 

Do you have any evidence for that? The only statements I could find were along the lines of:

"BlackRock, the world's largest asset manager, is reallocating assets out of the US economy in preparation for a looming recession and corporate debt bubble, as warned by other investors as well."

 

"Blackrock plans to move a significant portion of their portfolio out of the US and into emerging markets due to concerns about the corporate debt bubble, rising interest rates, and the potential for a looming recession."

In other words, a partial exit, not "entirely".

Yes you are correct, it appears to be a partial, albeit substantial portion, of their assets. The wording I've just read is below which is imprecise verbiage and also promotes some journalistic sensationalism:

 

"What is the main reason for BlackRock's exit from US markets?

—
The main reason for BlackRock's exit from US markets is the combination of concerns about the corporate debt bubble and the impending recession, which has led them to reallocate their assets into emerging markets".

 

Blackrock themselves, in their latest assets allocation report dated December 2023, said:, 

 

"On a tactical horizon, our overall macro view would keep us underweight developed market (DM) equities as a standalone because we expect growth to stay stagnant with persistent inflation, prompting central banks to keep policy rates higher for longer". 

 

The other part of this is that BR has changed safe custody bank from State Street and has spread their ETF assets across the major banks, a move that makes oodles of sense but which sparked rumor's about BR's views on the safety of US banks.

 

https://www.blackrock.com/us/individual/insights/blackrock-investment-institute/outlook

 

https://www.blackrock.com/corporate/literature/whitepaper/bii-global-outlook-2024.pdf

 

https://www.fnlondon.com/articles/blackrock-to-move-2tn-away-from-state-street-as-jpmorgan-citi-and-bny-set-to-benefit-20211208

 

 

 

 

 

[Mike Lister]

An interesting quarterly asset allocation and 2024 outlook (with rationale) from Blackrock, link below:

 

 

https://www.blackrock.com/corporate/literature/whitepaper/bii-global-outlook-2024.pdf

[Yellowtail]

11 hours ago, spidermike007 said:

Prices are already dropping in many markets, and houses are going unsold for 6 months to a year. I expect the real estate market in the US to drop very significantly over the next three years, it's over inflated to a ridiculous degree. 

 

How will that affect the rest of the economy, what are the chances of a recession, will they be able to tame inflation? That and the ongoing wars around the world are huge variables. 

I hope your right about home prices correcting. I view home values in desirable area (and no one seems to share this view) as largely tied to interest rates. I think for a fair percentage of homeowners, it's the only "investment" they have. As the value goes up, and the interest rated is stable or goes down, they refinance. So, in ten years, the house is worth twice what they paid for it, but they have zero equity. The problem comes when the market drops, and they get upside down and dump them.

 

Anyone getting a home loan today has a payment that is 50% more than the same loan amount would have been three years ago, that is not insignificant. 

 

It seems like in the US you can default on loan and buy a new car with zero down the same day. 

 

 

[swissie]

On 1/2/2024 at 4:36 AM, Yellowtail said:

I would not expect the rate cuts in the US to do much of anything.

 

My biggest concern is that I think it's taking too long for residential real estate in US to correct, and that we'll see another crash. 

Commercial RE in the US is the "soft underbelly" within the RE universe.

 

[swissie]

There are many economical factors that will shape 2024. But the ONE major event that will shape the word (the world economy) will happen in November.

If a certain republican candidate should win the presidential election, we will wake up to a new world.

The ramifications that this would have would not only affect investors, but every living person on this globe. The ultimate game changer, dwarfing all other factors.

[swissie]

On 1/2/2024 at 2:39 AM, Mike Lister said:

Just like many others, I'm trying to decide what my investment strategy should be for the year and was trying to consider the pluses and minuses of what will happen to the US S&P. I invest globally but US Equities Markets represent over 50% of the Investable World and contagion from those markets will spread.

 

The question I ask is, what are the key pluses and minuses that will cause the US S&P to climb or fall, during 2024, below is a brain dump to get started:

 

Pro’s

 

Falling interest rates mean consumers will switch out of Services and into Goods, where the S&P is heavy, even if GDP is not.

 

Valuations remain high but improved operating efficiencies could mean that profits remain high.

 

A weaker USD should help promote exports and increase demand, AS LONG AS importing economies are able to buy.

 

Note: the election outcome is potentially negative or positive, based on its outcome so is SPECIFICALLY EXCLUDED.

 

Con’s

 

The risk of a credit bubble weighs heavily, Blackrock exited US markets completely as a result

 

The (Bond Market) Yield Curve is inverted. The 10 year and 3 month spread is a key recession indicator, it represents the relationship between long-term bonds and what’s often considered the risk-free interest rate. In late October, the 10 year-3 month spread turned negative for the first time since February 2020. It is now almost twice as negative as the 10-2 year spread.

get.ycharts.com/resources/blog/inverted-yield-curve-what-it-means-and-how-to-navigate-it/#:~:text=An%20inverted%20yield%20curve%20is,more%20than%20shorter%2Dterm%20ones.

Markets are over valued, using historically averages, by between 32% and 50%

www.estimite.com/post/is-the-us-stock-market-overvalued/

 

Companies that must refinance face higher financing costs

 

Excitement over AI may be creating a bubble

 

Economists are split between a mild recession and mild growth in 2024.

 

The war against inflation hasn’t been won yet and the need to reduce rates to stimulate economies is potentially  at odds with winning that war.

www.imf.org/external/datamapper/PCPIPCH@WEO/ECU

 

Government debt is the highest it’s ever been, USD 34 trillion, and climbing faster than it ever has. Any action to reduce the debt such as government closure, reduced services might impact spending and markets.

 

www.pgpf.org/national-debt-

clock#:~:text=The%20%2433%20trillion%20gross%20federal,that%20it%20owes%20to%20itself.

Climate risk is increasing which will result in higher insurance company payouts, loss of productive, business disruption and higher costs and losses.

 

Global war risks have increased in the ME and Ukraine which have to potential to increase the US debt load.

 

Market gains are being driven by only seven giant companies rather than the broader market. In the year ending mid 2022, S&P gains were over 15% but if FANG stocks were removed, the gain falls to only 6%. The picture in the last few months is likely to be even more extreme hence indices are distorted.
 

 

Not the first time I recognise you as a "serious investor", doing his homework. Your contributions are welcome and of importance.
Of the many indicators, Dr. Copper can serve as an simplified indicator of things to come.

In spite of all the overwhelmingly positive fundamentals and the promess of global "electrification", Copper fails to surpass recent highs. Rather heading south.

I like Dr. Copper as a simplified indicator of future economic activity. Currently Dr. Copper indicates: "Yawn". 

[Mike Lister]

6 minutes ago, swissie said:

Not the first time I recognise you as a "serious investor", doing his homework. Your contributions are welcome and of importance.
Of the many indicators, Dr. Copper can serve as an simplified indicator of things to come.

In spite of all the overwhelmingly positive fundamentals and the promess of global "electrification", Copper fails to surpass recent highs. Rather heading south.

I like Dr. Copper as a simplified indicator of future economic activity. Currently Dr. Copper indicates: "Yawn". 

Dr Copper, I like that and you may well be right. Personally, I like simple indicators much more.

 

I can't seem to shake the November election issue, it's far easier to assess the impact of say high oil cost or inverted yields curves than it is an undesirable election outcome. The problem is I think, I can't quantify what it means, I know it's bad but I can't properly translate it into economic terms. It's for those reasons that I'm leaning much more strongly towards Japan, India and even China this year and I'm understrength US. 

 

 

[metisdead]

Some more off topic posts about Bitcoin have been removed as this topic is not about investing in Bitcoin. 

[noobexpat]

I'm 100% equities ...but with +20 years annual expenditure in cash (increasing monthly).

Reasonable spread geographically - maybe 40% USA?

75% trackers and remainder actively managed. No single shares.

 

I've just been funding global trackers lately.

For me, trying to be strategic with a very long investment horizon is pretty futile, in my opinion.

 

 

[paddypower]

On 1/2/2024 at 12:03 PM, Mike Lister said:

A lot of very capable thinkers like Burry are predicting another financial crisis, as said in the OP, Blackrock has exited the US markets entirely because of this belief. That's a huge move to take for a firm that size, in the business they are in.

 

I think that value of USD will have a lot to do with what happens, it will also impact expats in Asia because of the exchange rates and Asian economies. A strong Dollar will kill US equities whilst a weak Dollar will stimulate exports and increase demand. But that weak Dollar will also aid EM currencies and EM economies, even if it does make the Baht exchange rate unattractive  to resident expats. Logically, a weaker dollar is  more helpful than not to everyone (except us).   

 

[Thailand J]

I am fully invested, my question is what to sell.

 

I am invested in US stocks. US large companies derive up to 60% of their revenues overseas.

[paddypower]

27 minutes ago, Thailand J said:

I am fully invested, my question is what to sell.

 

I am invested in US stocks. US large companies derive up to 60% of their revenues overseas.

 

45 minutes ago, paddypower said:

My post got lost. Just as well... offtopic, as I'm small potatoes 🙏. To summarize, wouldn't touch equities, nor bonds with a barge pole. 10% cash, 30% unencumbered investment  property (Thai beach front), 85% Thai Income Funds, 5% gold, 5% crypto start-ups. As for net worth, 50% is in my home(beach). I know, not much of use to OP

 

46 minutes ago, paddypower said:

 

 

[xylophone]

Trying to answer the OP's question about the investing year ahead will have a different meaning for different posters I would suppose. Those with an overall long-term investment plan (because they are younger) will be different to folks like me in my mid-70s who try to focus on capital retention.

 

To this end I am about to cash up the shares in the only two companies in New Zealand in which I have invested, and which have performed very well over the years with overall growth of around 200%, and average dividends of 5.5%, and focus on fixed interest in the main.

 

For a two-year term deposit I can get 6% and for a five year term deposit 5.5%, so investing in those two TDs will provide a healthy interest amount, then a lump sum in a peer-to-peer lending company which at the moment is paying around 8% pa, then leaving some in a low interest bank account for emergencies/everyday use. Even if the interst rates decline I will have enough from interest and capital on which to see out my years.

 

I have calculated that the interest alone from my investments, coupled with my country pension, should provide me with around 1.3 million baht per annum upon which to live, and as I've already taken care of the 800,000 baht needed for my retirement extension, I don't see any obstacles.

 

That is going to be my investing year ahead, and tomorrow will be the first day when I put it into action by cashing up my NZ shares.
 

[Mike Lister]

I agree with Blackrock's logic that short term investment grade bonds with a duration of under 3 years is a better alternative than money markets as a place to park cash. Meanwhile. the long term agg index fund still looks like a good bet, even if some think rates could go either way. Also, the iShares Japan fund has done good things so far, up 13.4% thus far.

[noobexpat]

3 hours ago, xylophone said:

Trying to answer the OP's question about the investing year ahead will have a different meaning for different posters I would suppose. Those with an overall long-term investment plan (because they are younger) will be different to folks like me in my mid-70s who try to focus on capital retention.

 

To this end I am about to cash up the shares in the only two companies in New Zealand in which I have invested, and which have performed very well over the years with overall growth of around 200%, and average dividends of 5.5%, and focus on fixed interest in the main.

 

For a two-year term deposit I can get 6% and for a five year term deposit 5.5%, so investing in those two TDs will provide a healthy interest amount, then a lump sum in a peer-to-peer lending company which at the moment is paying around 8% pa, then leaving some in a low interest bank account for emergencies/everyday use. Even if the interst rates decline I will have enough from interest and capital on which to see out my years.

 

I have calculated that the interest alone from my investments, coupled with my country pension, should provide me with around 1.3 million baht per annum upon which to live, and as I've already taken care of the 800,000 baht needed for my retirement extension, I don't see any obstacles.

 

That is going to be my investing year ahead, and tomorrow will be the first day when I put it into action by cashing up my NZ shares.
 

 

I think we may have had a previous chat about P2P.

What sector are you going into?

I think they are a great asset diversifier but covid decimated the UK market for this asset. Many providers couldn’t risk assess and new money was stopped and funds wound down. Shame!

[xylophone]

1 hour ago, noobexpat said:

 

I think we may have had a previous chat about P2P.

What sector are you going into?

I think they are a great asset diversifier but covid decimated the UK market for this asset. Many providers couldn’t risk assess and new money was stopped and funds wound down. Shame!

I am investing in residential property Noob, but through two companies designed to 'protect" the investor via legal documents which mean that the company can acquire the property and sell it should the borrower default on an interest payment. Therefore the LVR (Loan to Valuation Ratio) is important, meaning that in the event of a default, when/if the property is sold there is enough to pay back the loan (my investment) and ensure some is left for the original borrower.

 

I therefore look at properties with an LVR around the 50% mark.

 

One of the properties I invested in was that of a retired person who had a house on a few acres of land and gained council permission to build a couple of houses on the land, however because he wasn't working anymore, no bank would lend him the money to build because he had no income, so in effect could not meet the bank's criteria for mortgage repayment, and that's when peer-to-peer lending can come into play because the money I put into it helped build a house, which was subsequently sold and the proceeds paid back my loan, and left the retired person with a profit. 

 

Hope that helps.

[noobexpat]

12 minutes ago, xylophone said:

I am investing in residential property Noob, but through two companies designed to 'protect" the investor via legal documents which mean that the company can acquire the property and sell it should the borrower default on an interest payment. Therefore the LVR (Loan to Valuation Ratio) is important, meaning that in the event of a default, when/if the property is sold there is enough to pay back the loan (my investment) and ensure some is left for the original borrower.

 

I therefore look at properties with an LVR around the 50% mark.

 

One of the properties I invested in was that of a retired person who had a house on a few acres of land and gained council permission to build a couple of houses on the land, however because he wasn't working anymore, no bank would lend him the money to build because he had no income, so in effect could not meet the bank's criteria for mortgage repayment, and that's when peer-to-peer lending can come into play because the money I put into it helped build a house, which was subsequently sold and the proceeds paid back my loan, and left the retired person with a profit. 

 

Hope that helps.

 

Interesting. I do remember you telling me a bit about it a while back. Good luck with it.

 

There used to be funds whereby people's investments were pooled, a big commercial aeroplane was purchased and leased to the likes of emirates. At the end of the lease period (5 years), the plane was sold and the fund ended and returns distributed. Again, i think covid put a stop to these.

 

Some fascinating investments about.

[paddypower]

15 hours ago, xylophone said:

Trying to answer the OP's question about the investing year ahead will have a different meaning for different posters I would suppose. Those with an overall long-term investment plan (because they are younger) will be different to folks like me in my mid-70s who try to focus on capital retention.

 

To this end I am about to cash up the shares in the only two companies in New Zealand in which I have invested, and which have performed very well over the years with overall growth of around 200%, and average dividends of 5.5%, and focus on fixed interest in the main.

 

For a two-year term deposit I can get 6% and for a five year term deposit 5.5%, so investing in those two TDs will provide a healthy interest amount, then a lump sum in a peer-to-peer lending company which at the moment is paying around 8% pa, then leaving some in a low interest bank account for emergencies/everyday use. Even if the interst rates decline I will have enough from interest and capital on which to see out my years.

 

I have calculated that the interest alone from my investments, coupled with my country pension, should provide me with around 1.3 million baht per annum upon which to live, and as I've already taken care of the 800,000 baht needed for my retirement extension, I don't see any obstacles.

 

That is going to be my investing year ahead, and tomorrow will be the first day when I put it into action by cashing up my NZ shares.
 

as someone else posted - this is a fascinating topic, thanks to the OP for starting it. we're in our late 70's. so its very helpful to read posts like yours. congrats on the 2 wins. still recovering from last years WC encounter with your AB's

[paddypower]

9 hours ago, noobexpat said:

 

Interesting. I do remember you telling me a bit about it a while back. Good luck with it.

 

There used to be funds whereby people's investments were pooled, a big commercial aeroplane was purchased and leased to the likes of emirates. At the end of the lease period (5 years), the plane was sold and the fund ended and returns distributed. Again, i think covid put a stop to these.

 

Some fascinating investments about.

way off topic - Ha! that would have been a very bumpy 5 years, if it had been the plane (Montego Air Flight 828) which was featured in the TV series Manifest (quite an interesting watch; plot-line - the plane and 191 passengers disappeared for 5 years) 555

[Digitalbanana]

On 1/2/2024 at 8:39 AM, Mike Lister said:

Note: the election outcome is potentially negative or positive, based on its outcome so is SPECIFICALLY EXCLUDED.

The stock market has risen in approximately 60-70% of election years, while falling in the remaining 30-40% of years.

[Yellowtail]

18 minutes ago, Digitalbanana said:

The stock market has risen in approximately 60-70% of election years, while falling in the remaining 30-40% of years.

How is election year defined? 

[Gottfrid]

Everything points at that Small Cap Value Stocks is the right way to go, as they show the highest yield in percentage.

Besides that, can all of us in Thailand that have wife´s we can trust, find good value in buying up land close around new housing projects. During many years that has shown to be a good investment as the price rises quicker due to the demand for shops and companies around housing areas.

[Mike Lister]

11 minutes ago, Gottfrid said:

Everything points at that Small Cap Value Stocks is the right way to go, as they show the highest yield in percentage.

Besides that, can all of us in Thailand that have wife´s we can trust, find good value in buying up land close around new housing projects. During many years that has shown to be a good investment as the price rises quicker due to the demand for shops and companies around housing areas.

Agreed

[paddypower]

2 hours ago, Gottfrid said:

Everything points at that Small Cap Value Stocks is the right way to go, as they show the highest yield in percentage.

Besides that, can all of us in Thailand that have wife´s we can trust, find good value in buying up land close around new housing projects. During many years that has shown to be a good investment as the price rises quicker due to the demand for shops and companies around housing areas.

it may be ok for your situation, easy to buy land, and sell. For an expat couple its a completely different story. Ive posted elsewhere that my investment strategy is to buy beach land. There is an international market for that. Go check with the banks in your area. You'll see a lot of repossessed land/shop houses. and judging by the direction that the total private sector consumer debt is going...there will be more repo's.

[Mike Lister]

8 hours ago, Digitalbanana said:

The stock market has risen in approximately 60-70% of election years, while falling in the remaining 30-40% of years.

Possibly so, but, I didn't want to get into a debate about the economic pro's and cons of who might win the election.