LIVING OFF DIVIDENDS & PASSIVE INCOME

Based on my own experiences of being allowed to borrow 40 times my annual income to purchase investment property, I knew the real estate party was going to end badly for many borrowers, banks and eventually tax-payers. I had tried  shorting Countrywide, which was the largest lender of mortgages, last year when the stock was trading at around $36. Unfortunately, I was a little early and closing my position at $39 incurring a substantial loss. If I had held on to my position, with Countrywide currently trading in $6-$7 range, I would’ve have been handsomely rewarded.

Hopefully, I’ll have the fortitude to hold onto my positions next time. Right now I think the Commercial real estate is the next bubble to burst.  Read more... (266 words, 8 images, estimated 1:04 mins reading time)

Here’s a really, really good video on how the carry trade works and what implications it has on global asset prices and the global financial stability.

I think the carry trade will have to reverse at some point in the near future. Trees do not grow to the skies and financial excesses do not last forever. When the average man on the street with no financial education starts talking or investing in a particular sector, it usually marks the end of that run. (In 2000 I overheard my hair-dresser talking about internet stocks – I should’ve sold then. In early 2005, I overheard some guys at the movie theater talking about getting into the local real estate market – I sold then and I’m glad I did!)  Read more... (205 words, 8 images, estimated 49 secs reading time)

I regularly read the ‘Daily Pfenning’ by Charles Butler of Everbank.com.

Today’s issue was especially bearish on the dollar.

The Yen finally started to move back up hitting a one month high over the weekend on speculation the Bank of Japan report tomorrow will show an improved economic outlook. The BOJ will make their rate announcement tomorrow before releasing a semi-annual report that will outline the bank’s forecasts for prices and the economy. Any hint at higher rates before year end should propel the yen back toward 110.

Other Asian currencies gained last week also, with the Thai baht rising to a seven-year high. Thailand’s central bank raised its growth estimate for next year to between 4.5 percent and 5.5 percent from a previous forecast of between 4 and 5.3%. It also lifted its prediction for export growth this year. While the gains in the Singapore $ were met with possible intervention by their central bank, the Bank of Thailand governor said the central bank would let the markets do their job in stemming the rise. So it looks like we have a green light for further increases in the baht.  Read more... (419 words, 8 images, estimated 1:41 mins reading time)

Finally managed to buy the Japanese REITs yesterday. The Tokyo Stock Exchange is about 14-16 hours ahead so you have to submit it and check on it later to see if you got lucky.

I’m betting that the Yen will appreciate 20% against the US Dollar[although as moominvalley pointed out, I bought it with Australian dollars!] and that the stagnant Tokyo RE market will pick up.

On another note, the $50 amazon gift card give-away for posting on The Weekend Investor forums doesn’t seem to be taking off. I might have to put up another prize to maybe give away a ~100 year old Morgan Silver Dollar to the person with the highest posts! [login to the weekend investor and let me know if you think you need more motivation!]

In a previous post I had mentioned that a Japanese REIT was going IPO. I was wondering how I could get in on the action. It seems like a good idea – the Dollar should weaken against the Yen and Japan’s Real Estate should appreciate after almost a decade and a half of stagnation.

It seems its rather more difficult than it is in the US. Unless you buying a stock that trades as an ADR, you need to open an account that allows you to purchase stocks on a foreign exchange. Luckily I had already an account with Interactive Brokers to buy Australian dollars which allows me to trade on the Tokyo Stock Exchange.

Unfortunately, there’s a 13 hour time difference and so the trades have to be placed in the evenings. Also its a little bit trickier than placing trades through a US online-trader and there’s no phone support [although there is online chatting] and the Tokyo Stock Exchange doesn’t really provide much information about the individual stocks.  Read more... (508 words, 8 images, estimated 2:02 mins reading time)