Kuta Beach

Kuta Beach

Saturday, 28 November 2009

Investing in AREITs

When the GFC hit, Australian shares as measured by the All Ords went down from peak to trough by about 50 per cent. However, Australian real estate investment trusts (AREITs) as measured by the S&P/ASX 200 A-REIT index went down by about 80 per cent as the listed property sector in Australia was savaged.

Even though the listed property sector is very unhealthy, if you believe the sector will eventually recover, it is a good idea to start buying into the SPDR S&P/ASX 200 Listed Property Fund (code SLF on the ASX). I purchased some last week.

I have recently been reading a now-old (June 2009) Kinetic Research ETF research paper on SLF. Here are some interesting points the paper makes:

- REITs are legal structures that force companies to pay a large portion (about 90 per cent or so) of their profits as distributions to shareholders. This is great for income but may not be great for tax effectiveness.

- The forecasted yield for SLF for 2009 is 9.56 per cent. For 2010 it is 8.3 per cent.

- The forecasted PE ratio for SLF for 2009 is 10.7. For 2010 it is 11.27. Compare this with the PE ratio of the iShares MSCI BRIC ETF (another ETF I have been thinking of purchasing) of 21.12. This means SLF gives about twice the earnings for the price.

- If State Street (the company that manages the ETF) collapses, unitholders receive back the unemcumbered assets within the trusts. In the event of collapse, unitholders will receive legal title of the component shares within the ETF, i.e. they will receive 40% Westfield, 16% Stockland, and so forth.

Saturday, 21 November 2009

The Second Wave of the Credit Crisis

I have just read a special report that Money Morning emailed me. The report is called What Every Australian Homeowner Needs to Know Now about the Coming "Second Wave" of the Credit Crisis.

Basically here is what is says:

- Rising share prices is backed by rising productivity. "What is the productive output of a house that causes it to continue rising in value?"

- Now is the worse time to buy Australian property because prices are at historic high and interest rates are at historic lows and will soon rise.

- Normally when a price bubble bursts there is a massive runup in prices (the article calls it a "super spike") before a collapse.

Pingus

Lately I feel as if I have been becoming dumb. When I talk to people I just don't say interesting things anymore. This is surprising to me because when I was in high school and during my early days of university I was considered quite smart, and I also felt very smart as well. I suspect something has happened to me since then. My guess is that my life has gotten comfortable and I have been watching a lot of television and reading a lot of junk on the internet. As such I haven't really challenged my mind much, which means my brain does not get vital exercise it needs.

The solution to this problem is to do what I used to do a lot when I was young, which is to play lots of games, especially puzzle, strategy, or tactical games. I could always go out to the computer game store and buy some of the latest games, but why would I do that when there are so many free games for download over the internet.

One free game I recommend to people is called Pingus. This is a game I highly approve. It is very addictive. I managed to win the training quite easily and then finished all the levels. Some of them were challenging. The problem is that after I won all the levels and completed everything, I wanted to play more levels but didn't know how to. I read that you can download more levels to play but the problem is that I don't know how to install these levels.