In yesterday's Digest Premium, I (Porter) shared some of my recent interview with Asian-investment guru Peter Churchouse from a recent episode of Stansberry Radio Premium.
I asked Peter to join the show to discuss what makes Asia such an intriguing investment opportunity... and how he knows when to sell. Today, I wanted to offer some details he gave about how he values a property market.
When I look around the world at equities – when I do a top-down analysis – I'm looking for high real interest rates... low price-to-earnings multiples... and high dividend yields.
So I asked Peter what metrics he uses when he's analyzing the property market...
Peter pointed out that in the U.S., real estate investment trusts (or REITs) make up an overwhelming majority of real estate stocks. That's not the case in Asia, where Peter estimates it's closer to 15% of the real estate market.
|
Peter and his son (and business partner) Tama also focus on leverage...
|
Every week, I host well-known guests like Jim Rogers, Peter Churchouse, and Doug Casey on my Stansberry Radio program. S&A editors, like Retirement Trader's Dr. David Eifrig and Extreme Value's Dan Ferris, are also frequent guests.
And as I mentioned yesterday, Peter appeared on the subscriber-only version – Stansberry Radio Premium, where I ask guests to share their top current investing ideas. To learn more about a subscription – and how to gain access to these episodes – click here.
– Porter Stansberry with Sean Goldsmith
What an Asia real estate guru looks for in an investment...
Yesterday, we shared some of renowned Asia investor Peter Churchouse's views on opportunities in the region, particularly in real estate...
In today's Digest Premium, he explains how he identifies prime candidates for investment and how the Asian market differs from the U.S. market...
To continue reading, scroll down or click here.
What an Asia real estate guru looks for in an investment...
Yesterday, we shared some of renowned Asia investor Peter Churchouse's views on opportunities in the region, particularly in real estate...
In today's Digest Premium, he explains how he identifies prime candidates for investment and how the Asian market differs from the U.S. market...
To subscribe to Digest Premium and access today's analysis, click here.
Sell in May and go away?... Is the Fed controlling the fate of the world?... Gartman: 'Scary times'... Why currency fluctuations matter A LOT...
"Sell in May and go away" is one of the most popular clichés on Wall Street.
The idea is that the market will perform poorly during the summer months as warm weather entices investors to hit the beach and enjoy the outdoors before winter returns.
Historically, the adage has played out well. Take 2011, for instance. The S&P 500 hit a peak in May 2011 and slid 20% by that October. (In 2012, the action reversed and stocks gained 3% between May and October.)
This year, "sell in May and go away" is proving true again... so far. It's only mid-June and the S&P 500 is down more than 3.5% (as of yesterday's close) since stocks hit their 2013 peak on May 21.
Don't ask what's going to happen next. I (Dan Ferris) have no idea. Nobody does.
The financial press is convinced the stock market has fallen solely because of Federal Reserve Chairman Ben Bernanke's comments to the Joint Economic Committee of Congress on May 22. (Remember, the market peaked May 21... so it looks like investors got spooked around that time.)
Here's what Bernanke said to spook investors into selling during the question and answer session after his testimony...
|
That's it. That's all he had to say. And it sent billions of dollars running for the exits. The fear is that the Fed will stop buying and interest rates will rise. And higher interest rates are pure evil. Bernanke tried to quell the instant fear he knew he'd created with this...
|
Right now, a qualified borrower can borrow up to $417,000 to buy a home and pay about 4%, according to Bankrate.com. If you want to borrow for 15 years, you'll pay around 3.2%. More time means more risk a borrower won't pay, so longer loan maturities always mean higher rates.
If demand for 30-year mortgages rises, you can expect the interest rate to rise, too. And when rates are at 4%... how bad would it be for them to climb to 5%?
My wife and I have been thinking about buying another house. Our banker told me several weeks ago that rates were headed higher. At the time, rates were around 3.6% for a conventional 30-year mortgage to a good borrower. I didn't really care if rates moved 0.4% or 0.5% higher, especially when we're still looking at a mortgage rate of 4% or so. Even 4.5% is still cheap.
Of course, if some of the more dire predictions I've heard of short-term Treasury rates rising from around 1% to around 5%-6% come true, that really could cause a problem in the markets – particularly the bond market. But right now, many investors are reacting to marginal changes in longer-term rates, which I don't think are particularly significant.
The same dynamics play out for businesses. If they're borrowing at stupidly cheap rates today, borrowing at slightly higher – but still stupidly cheap – rates a year from now isn't going to crush them.
That's what most investors don't understand about interest rates right now. Higher rates don't mean the kiss of death for the economy or the stock market. They might just mean there's higher demand from folks looking to borrow money to buy a house.
Most people seem to think higher interest rates mean lower stock prices. In the short term, that might be true, if only to reflect the widespread beliefs of the thundering herd of ill-informed investors. But higher interest rates and higher stock prices are signs of a healthier economy. And they can occur simultaneously.
Some folks – like guru trader Dennis Gartman – are convinced that interest rates signal bigger macroeconomic development. Gartman appeared on CNBC yesterday. He said he's seeing extraordinary volatility in the currency markets. He says he hasn't seen such volatility since the Russian crisis of the late 1990s.
In the past seven months, the Japanese yen has plummeted. But it has spiked higher in the past month. The Australian dollar has plummeted since April. The U.S. dollar has gone through several spikes higher and lower in the past two months.
Gartman says these are "very scary times." In response to the extraordinary volatility, he's greatly reducing his position sizes. He's still "very bearish on the yen." You can see the wild yen action in the following two-year chart of the Japanese yen index. Remember, this is the currency of the world's third-largest economy...
We know currency volatility isn't the most entertaining Digest topic. But this is the world's monetary system we are talking about.
Currencies are the foundation on which our entire financial system is built. It's critical you know the cause of these moves... and how to protect yourself from them. As we noted in the May 8 Digest...
|
The U.S. dollar index measures the dollar's value against a basket of foreign currencies, like the yen and the euro. It's the generally agreed-upon measure of the dollar's global trade value. It tracks the value of our dollar-denominated bank accounts in terms of what they can buy around the globe.
In the May 8 Digest, we also showed you how the U.S. dollar index is bouncing up and down with tremendous volatility. Double-digit percentage changes in value are taking place in the span of months... not years. Check out the updated version of that chart...
Regular readers of Porter's work know the reasons behind this volatility...
It's the result of Western governments trying to print their way out of hopeless debt and unfunded obligations. Governments are printing money on a scale we've never seen before. Like all previous attempts at "papering over" problems instead of dealing with them honestly, this will end badly. And those who are ignorant of what's happening will be wiped out.
We're currently putting the finishing touches on Porter's June issue, which is due out tomorrow after market close. It contains a full commentary on the giant moves we're seeing in the bond and currency markets. If you want to make sense of what's happening right now, you'll want to make sure to read Porter's brand-new issue. Take advantage of our risk-free trial to read it. (If, in the first four months, you decide it's not right for you, we offer a 100% money-back guarantee.) It's a no-brainer. Learn more about a subscription by clicking here.
New 52-week highs (as of 6/12/13): short position on iShares Barclays 20+ Year Treasury Bond Fund (TLT).
What do you think the stock market will do in the next six months? How about interest rates? Do these beliefs affect how you invest today? Write us at feedback@stansberryresearch.com.
"Personally, I think the 'Education Center' is a great idea. I am not the most savvy computer/internet user so having these articles in one place is a great idea. I have a full time job and wish that I had more time to spend reading and learning from your publications, but I do the beat I can with the time I have. Thank you for what you publish and some people will just complain to hear themselves complain (the gimmie gimmie gimmie crowd). Thanks again." – Paid-up subscriber R.B.
"I get letter after letter after letter, as I am a follower of several letters, yet seldom (maybe 1 in 6) have stock recommendations in them, to tell us what and why to buy what stocks. That is why I buy your columns/letters, yet get nothing but meandering around among topics of no interest. Specifically, what should we buy and why, is why I joined each letter, yet many letters are wasted in not dealing with this topic. Yes, there are end of month letters that tell us stocks to buy, but so very seldom is this true. The meat in the cocoanut is what to buy-period, not what Japan is doing, or what some friend has done in his career, or Bernanke's poison of the economy, just why buy X stock." – Paid-up subscriber J.C.
Ferris comment: I imagine you'll get several responses to your inquiry from Digest readers. My only response is that if all you want is stock picks, get yourself a copy of the Wall Street Journal and throw darts at the stock pages. Otherwise, you'll have to get used to the idea that investing is about a lot more than stock picks. And our readers rely on us to provide views about all that goes into our investment recommendations, including views on Japan, successful people we know, Ben Bernanke, and many other investment-related topics that are all part of the "meat in the coconut," as you put it.
Regards,
Brian Hunt and Dan Ferris
Delray Beach, Florida and Medford, Oregon
June 13, 2013
What an Asia real estate guru looks for in an investment...