Recession investing?

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Permalink Reply by Kbot on April 20, 2009 at 12:46pm

It does make it tough, but I reckon there are some good opps in the sharemarket with 2009 shaping up to be a cracking year after the market was slammed in 07 & 08. That said, it'll probably be pretty volatile over the next few years. One thing that I've heard people talking about for getting good yield on your investments is hybrids, but alas, I know precious little about it.

Does anyone know anything about hybrids?

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Permalink Reply by JeffK on April 21, 2009 at 7:11pm

Actually I read about them just yesterday on the bull:

WITH YIELDS OF UP TO 13 PER CENT, NO WONDER INVESTORS ARE TURNING T...

Hope this helps.

What does everyone think about them? Are they a good investment?

JFK

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Permalink Reply by David Roberts on April 20, 2009 at 8:31pm

at the moment I am not investing for the long term, I am simply trading this bear market rally. I'm setting trailing stop losses so that a reversal, which will come shortly, will take me out with most of the recent profit. This rally is not based on any improvement in stock fundamentals or World financial state but by a bunch of lemmings chasing rising stock prices like before. All the major countries are pumping money into the economies which will simply force prices up, dollar down and gold will rise again. A selection of good reset preference shares might be a good bet for the next 18 months returning 7 to 10% with low risk.

Dave

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Permalink Reply by JeffK on April 21, 2009 at 7:12pm

What is the risk of reset preference shares? And how do you know which ones are good?

Cheers,
JFK

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Permalink Reply by David Roberts on April 22, 2009 at 10:38am

some of the risks of reset preference shares are (a) underlying risk of the company going belly-up - same as owning the ordinary share; (b) they should be linked to a margin above the CPI otherwise as inflation goes up, which it will with all the money being pumped into the economy, then those with fixed interest rates will become of less value; (c) if you need the money before reset or buy back then the capital value may be lower than the $100 issue price, however some Reset prefs are linked to the underlying share price of the company and can exceed the $100 (I don't think there are many of those left); (d) the company may change the rules and not buy back the reset prefs on the due date at the $100 face value but choose to extend the time frame just when you want the money to put back into a rising bull market. There are probably other issues but I'm not sure of them. I used to have a lot of Reset Prefs in my SMSF during the 2003 downturn but got rid of them as soon as the market started to pick up.

Dave

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Permalink Reply by Mark N on April 30, 2009 at 6:51pm

I'm from the UK and had my money invested in Hedge Funds, managed by a close friend of mine. He set up a business model some six years ago and has consistently made 15% - 20% returns every year, which is compounding -interest on the interest also! For the first couple of years I had just a small amount invested (what I could afford to lose), but then became hungry for more and borrowed loans to invest. I asked my fund manager if I could make a monthly withdrawal to cover the loan repayments which he said was fine. Now my loans are almost completely paid off, leaving me with the original loan amountl + much more still in the investment. My friend takes a small comission and has grown from the trading he did in his bedroom (and when his boss was not looking :) to owning a plush office and employing 9 staff. The recession has made him adapt his model to be more prudent and all I've seen is the ongoing rewards. As the day fluctuations of the markets still rise and fall in a predictable way, why isn't more people looking at hedge funds to beat the recession?

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