Some interesting financial and investing posts I ran across this week, plus a few decent articles from the newspapers.
Warning: This is a long post, and it’s as much to do with politics as investing. Read at your peril!
There’s no doubt the financial crisis has cheered up anti-globalisation campaigners who had been getting dismayed with how much their countrymen enjoyed cheaper consumer goods, and how China and India seemed to be doing very well while being ‘exploited’ by the West.
The downturn has even put on a smile on the face of old, blind and illiterate idealists who’d love to dig up the corpse of communism.
I haven’t got much to say to the latter (except: get a job) but I got an interesting glimpse into the former when I attended a lecture at the London School of Economics on Tuesday to hear Professor Dani Rodrik of Harvard University.
Rodrik is a Professor of International Political Economy, and is widely considered to be a big thinker in the realm of markets, institutions and capitalism. (Click here for Rodrik’s full bio).
As I’ll discuss below, he gave some interesting insights into the problems of regulating the global economy.
But his talk also highlighted how people with an anti-free-trade agenda are going to try to hijack the financial crisis as their force majeure.
Why does this matter to you as an investor?
I think the time has come to buy commercial property. And almost nobody agrees with me.
Hooray! The fewer buyers now, the merrier my eventual returns!
Commercial property is a core asset class. Yet most private investors only consider buying property after a long boom – when the fund industry is crowing about years of double digit gains, when their house’s value could pay off a small island nation’s national debt, and when they can’t even find their office because of all the new developments on the way to work.
Property has bond-like qualities, in that it represents a solid asset that produces an income via rents, where the yield rises as the price falls and vice-versa (provided the rental income doesn’t fall, of course).
Property also offers some of the rewards and risks of equities:
- The opportunity to make long-term capital gains
- The potential for income to rise over time, ahead of inflation
Bricks-and-mortar property offers some diversification away from equities.
It is also theoretically simple for experts to value, consisting of physical assets with a quantifiable replacement cost, compared with the murky world of equities, although this certainly doesn’t make property immune from wild fluctuations in value, as seen between 2006 and 2009.
While the expected rewards will be lower than with equities, on balance these traits make commercial property a core asset class in my book. It is particularly attractive to anyone seeking income.