Fact or Fantasy?

Peter Cramer

We all listen and absorb the gloom and negativity that the media throw at us… but maybe we should look at things a little more objectively? At some point in the future we will look back and long for the interest rates we have today and long for the opportunity to buy shares and property at today’s values.

I wonder how long into the future that is?

The opportunities are there now: if you have secure employment or a solid business (i.e. secure cash flow or existing cash reserves) then time will ensure your investments make money!

So is the following fact or fantasy?

Two retired businessmen were chatting over their fishing lines – not really caring if they caught something or not. “Well, its 2020, the end of the “teen years” – what a decade that was!” said one.

“Remember the world’s problems back at the start – the GFC; the Government stuff ups, the waste; the threats of Greece (remember Greece?) and Spain and the rest going bankrupt; the boat people; and those who said everything was doomed? How people put so much into cash and ended up with a paltry interest return? Remember those gurus who said property was going to crash by 50% and the sharemarket was too volatile and risky?”

“Yeah”, said the other one, who was now using shrimp as bait, “remember how interest rates fell to less than 3%! – Unheard of now! The best thing we ever did was take that advice of the real gurus – who said buy when everything looks bad and bleak: buy when everyone else is selling!”

“Too right” said the first, “it was a little scary at first, but boy, those shares I bought back in 2013, look at them now! The dividend yield is great and the growth – wow – what a ride we have had over the last 7 years! A great call was to borrow some money at those crazy cheap rates — the dividends & imputation credits more than paid for the interest and the capital growth put us miles in front.”

“Well I must admit” said the other, “I wasn’t game to borrow any money to invest – gearing was a dirty word then and I was a bit cautious, but even so – my investments have done very nicely” he remarked as he pulled in a 65cm cod!

“I think the big thing was China continuing on without really faltering, the big growth in India and the governments of our fair land finally doing a good job and forgetting about all the political point scoring and at last governing long term for the good of the people.”

So… what do you think today in 2013? Is that fantasy? What will the next 7 years bring? Maybe, just maybe, they will be good investment years? Given the low interest rate returns versus the higher returns from dividends on quality shares, is it time to seriously consider the share market? Isn’t that one of the real interesting things about life… we can’t tell the future, but we are all pretty good at hindsight! (P.S. Can you pick the bit that definitely is fantasy – unfortunately?)

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