Calling the bottom, a time to put your money where your mouth is

house prices droppingPerhaps the best way to show your sincerity is to show your hand, and by that I mean giving the people who are influenced by you an insight into what you are doing. So for all of the people who are saying that ‘now is the time to buy property’ then please step forward and show me evidence of deposits on property being paid or of contracts being sent to your solicitor (where you are the buyer not the seller!).

For some time our firm has been bearish on property, that is a total contradiction for a brokerage as we clearly have a vested interest, but there is one tenet that lies above that of day to day business and that is the rule of honesty, we believe that if we simply give our honest interpretation of the market that when proven correct (assuming we are right) it will let clients in the market know that we stand for something beyond our own interests, and that is an issue we have with many commentators on property who are crying out ‘buy now! buy now!’. Our simple request is that they go on the record and show us where they are buying, because if they are not buying this year then they shouldn’t be giving out that advice to others.

lloyds tsbOne thing that I have done in the past is to call the stocks I’ve bought, let’s look at what a loser I have been (but an honest one who will admit it nonetheless!). Firstly: Bear Stearns, lost 35% on what I bought in at, now JP Morgan Chase owns them, in fact, believing that the financials were nearing a bottom point I had gone into Lloyds as well as USB, as an average I’m down about 30%. You’d think that at this point I would have learned my lesson?

Far from it, I still believe in financial stocks, granted I might have to wait until 2010 or more to get back (if ever) what has already fallen off many of the share prices, but now I see value in Irish financials, last week I bought some BOI at €4.81. They are offering c. 16% dividends (that is on the assumption they make profits of course!) but it’s still four times better than what you can expect on deposit. I don’t think BOI are going to go out of business and that coupled with the potential on the dividend side helped me get over any reservations.

bank of irelandIf BOI go bang or don’t pay out dividend or drop below €3 for the next five years then it will be another shining example of how I got it wrong, however, I do try to spot contrarian potential, buying Elan at €1.75 back when I did was amongst the best moves I have ever made in terms of a return. The downside is that you have to suck up the pain when it comes (note: use of ‘when’ not ‘if’ because the only people who ‘never’ lose at stocks either never buy or only bought once and it was a winner then they never bought again).

the ISEQ has had billions wiped off it, the global markets are taking a hammering, driven primarily by the downfall of the financial stocks that once held it up, this downturn (while different from the dotcoms) is another example of the shining knights of the Dow and Nasdaq becoming the dark horses who pull down the indices.

keys to homeBack to property though, there are people who say that now is the time to buy, to them I would like to point out that I see ‘now’ as being the same ‘now’ that made me buy Lloyds and Bear Stearns, we are on a slide but we are not at the bottom yet, property still has a way to go, if you see something that you feel represents value then go for it, or if you want to build a portfolio in 2008 go right ahead, the issue here is with passing out this advice willy-nilly to the public who are likely not nearly as sophisticated an investor as you (the property person) are. Be mindful of the effect that you have on others. Especially when you might be tipping them on a losing horse.

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