Wednesday, September 25, 2013

Me rambling about the market, dividend stocks and REITs

The S&P is now back to where it was a few weeks ago, looks like they need to announce that they are not tapering again, just in case people forgot. That ought to blast stocks back through the roof, even if there isn't any new market information, just repeating the same old.

As of now, I'm just fooling around with some currencies based on technical analysis and I'm shorting the S&P quite heavily. The index is screwing around with me, kicking me out at my stop loss 4 times now, before doing a full 180 about one point after my stop loss. Seriously pissing me off. Anyway, so many things are pointing towards the US economy being crazy right now. Although it has performed well YTD, I ain't gonna stick my hands in that honeypot.

As you know, I love the concept of dividend stocks. I'm so tempting to put myself in positions which are globally diversified, but still in dividend stocks. However, after reading this article, I'm not too sure about it.

I think the best course of action for me now is really to just sit tight with whatever I have, and hope and pray for a very very nice and pretty market correction. Hopefully, it turns into panic and then a mass depression follows. I honestly rather everything just break down now, so I have many wonderful years of smooth sailing ahead of me, haha!

I think once the economy tanks, I will be very very largely be picking up high quality, dividend growing, dividend stocks. Basically, whatever that survives, ought to be investment worthy. Not only will this provide me easy access to dividend stocks, but the prospects of massive yields just makes me squeal, haha.

Next, I will also be going in quite strong in global real estate equities, which are basically REITs. For REITs, it's just the yields that really appeal to me, along with the fact I think that real estate is always a good investment, especially at deep discounts.

Read this fascinating article by JPMorgan, and maybe you'll be as sold as me. The main takeaways are that REITs actually behave like actual real estate in the long run. They are very much bond like in terms of their income generating power, since they will always generate income, regardless of the price of their stocks. However, they are also very much equity-like, being affected by the swings in market prices. Now, like I just said, that means you can actually pick up cheap "real estate" relative to its actual value. And lastly, US REITs are overbought and overvalued now. Not that surprisingly, Asia-ex Japan REITs are the cheapest, going at a 30% discount based on their research. Well, that was more than a year ago in 2012, but I think the consensus is pretty clear, global REITs are cheaper and have less volatility.

However, my big gripe here is that most REITs portfolios have a large chunk of the US in them. There's a fund from Henderson, but it has half of its weightage in Japan, and I just can't take that. I think you guys know my stance on avoiding Japan. The next closest thing to broadly capture the Asian REITs market is through Lyxor ETF FTSE EPRA/NAREIT Asia ex-Japan. Honestly? I love it! 57% in HK and 27% in Singapore! Basically, the 2 most overpopulated countries in Asia, haha! My only grip about this is that it only pays out a paltry 1.5% dividend. If the HK property bubble finally explodes, I'm definitely going in strong with this one! When the Singapore real estate sector tanks, I'll definitely be going in stronger in my position with the Phillip Real Estate Income Fund. But frankly speaking, I would really much rather own actual shares of the fund constituents. Management fee is at an acceptable 0.8%, which actually drives it really close to a lot of the more narrowly defined and smaller ETF listings here. The Lyxor ETF expense ratio is 0.65%. I think you can tell that I really like it.

However, I have a big gut feeling that if the US economy crashes, it is going to nicely drag down the Singapore and HK economy as well, effectively popping both housing bubbles here and in HK, along with sending equities prices to deep discounts. When that happens, I'll see the situation. If REITs are more badly beat up relatively to equities, I think you can be sure that I'm going straight in there. If not, I'll be heading into dividend equities based on regions, and slowly monitor the property market.

The ideal situation is for me to be able to enter similar ETF positions as my mutual fund positions, so that I can see which is actually outperforming the other. I think this can be done quite accurately with with the DBX High Yield Asian Dividends ETF compared to First State Dividend Advantage. Both of them monitor Asia ex Japan, so I should aim to get equal weightage of both, and let them rip! It's probably going to set me back $7k on the ETF, so I should aim to have 7k in the mutual fund as well. There's no ETF comparison for Global dividends though, so perhaps I will split my money across different funds that aim for equity income as well. For EM dividends, there is really only 1 choice available, haha.

Honestly, whether the property markets tanks first, or the stock markets crash, ultimately just by sitting on the sidelines and going in when the dust has settled will reward me in a much larger way than me taking action now, regardless of what I decide to do, be in invest in an actual property of my own, or into my financial investments.

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