Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (23994)	2/20/2005 7:05:41 PM
From: RealMuLan	Read Replies (1) \| Respond to of 116555

[This is just great<g>]--"Stocks could overtake housing" BY GAIL MARKSJARVIS Posted on Sun, Feb. 20, 2005 Pioneer Press During the last five years, skyrocketing home values salved the wounds of investors who lost fortunes in the stock market. The average home price climbed nearly 57 percent in the Twin Cities in that time, while the devastation from the market crash of 2000 left some investment portfolios in worse condition than five years ago. A person who put money into the stock market (the Standard & Poor's 500) at the end of 1999 would still be down 17.5 percent, and an investment in the average stock mutual fund would be up just 0.46 percent, according to Lipper. The difference in performance between housing and the stock market is even more pronounced if you consider how people invest in homes. Typically, people put only a small amount of money into a home purchase. So if a person made a $20,000 down payment on the average Twin Cities home five years ago, the homeowner would have enjoyed almost a 400 percent return on their money, says Lawrence Yun, senior economist for the National Association of Realtors. Whether you look at it that way or not, it's no wonder that financial planners such as David Hoelke have been talking clients back to reality when they've insisted: "The only thing that doesn't go down is real estate." The scars remaining from 2000 and 2001 have left some people "repulsed by the stock market," says Hoelke of Minnetonka. If investment managers from throughout the world are correct, average investors might come to see reality differently during the next year. In a monthly survey of the world's fund managers, Merrill Lynch found that two-thirds of investment professionals think stocks will deliver returns that are better than, or at least as good as, housing in the next 12 months. The world's managers are increasingly optimistic about the stock market — boosting their investments, while cutting back on bonds. Of course, the managers are in the business of investing in stocks and bonds, so that could be coloring their view of housing. Yet, to select the best performing stocks and bonds, professional investors must analyze the economy and various industries worldwide. If the pros are correct, people who have avoided the stock market and invested in homes instead could end up rethinking their strategy. Last year, counting on homes was definitely the right move in certain markets. The prices of homes in Las Vegas climbed 48.7 percent — one of the hottest markets in the nation. But nationwide, home appreciation was slightly behind the stock market's returns: The market was up 8.9 percent and homes added 8.3 percent to their value. Home appreciation in the Twin Cities was neck and neck with the S&P 500's 8.9 percent return. The National Association of Realtors is predicting 5 percent growth in U.S. home values for 2005. The fund managers in Merrill's survey did not predict either home or stock market returns specifically, but 96 percent are expecting the Federal Reserve to raise rates. Rising rates can restrain business profits and stock market returns, as well as slow the housing market. When companies must pay more to borrow money, their costs of doing business go up. But the fund managers are not worried about that. Instead, Merrill Lynch chief investment strategist David Bowers said in a report, "What is striking this month is just how positive asset allocators are on equities." "Asset allocators" decide how much money to invest in stocks, bonds and cash. When they are nervous about stocks, they increase the percentage of money they put into bonds and cash and decrease their exposure to stocks. But for the sixth month in a row, those surveyed have increased their exposure to stocks. Typically, if they kept the money in their funds in balance, they would hold 50 percent in stocks and 50 percent in bonds. But one in four managers is so optimistic about stocks they've boosted stock holdings to 65 percent of their portfolios. Interestingly, the managers see risks ahead for corporate profits. But their enthusiasm for stocks remains high anyway because of one key fact: During the last four years, companies have put a lid on spending and have used cash to pay down debts and build up a war chest of savings. Now, the managers say companies have so much cash available that they can make purchases or expand their businesses by dipping into their own coffers or using their strong financial position to borrow at low rates. It's a luxury that deeply indebted consumers might not have when buying homes. twincities.com