Asset Investment Performance | Opinion Poll

It's been a while since we ran a poll on IPINLive, the last one being the future of the Euro after the uproar concerning the bailout of Greece and Ireland - the results of which are surprisingly close...

It's been a while since we ran a poll on IPINLive, the last one being the future of the Euro after the uproar concerning the bailout of Greece and Ireland - the results of which are surprisingly close:

Why such a close result? Whilst there is no doubt there is desire to start again as far as independent currencies are concerned, I suspect the fairly even split is due to the exorbitant costs involved in restructuring an entire continent's currency mechanisms again - something few governments anywhere can afford right now.

We asked "Should Euroland be able to make its own way?"

Poll Results. Keep the Euro?

This month's opinion poll is more along the lines of investment asset allocation and performance.

We have seen some enormous spikes and dives in the performance of major investment assets over the past few years; gold, property, stocks and oil. Some seem to be continuing with their bullish trend, whilst others are stagnating or falling.

As such, none of the assets we are asking about here really have a direct correlation to each other anymore (although in days gone by it could be said that gold and stocks were almost always negatively correlated) and are influenced more by investor sentiment, the press and a whole herd of other things caused by the rapid globalisation going on at the moment.

We have chosen just the 4 investment heavyweights for this poll: gold, property, stocks and oil. Whilst, granted, property is not really a "traded commodity" as such (other than in REITS and funds and so on) the exercise here is to establish what you think will be the best performer over the next few years.

My opinions?

Well, for what they are worth they are as follows.

Stock Markets - Obviously this is very general given the number of stock exchanges in existence around the world, but the major markets will remain relatively stable. Whilst the stock markets can be fickle places at the best of times, they do seem to be holding their own - despite widespread recession. Of course there will be anomalies if there is a coup somewhere, war breaks out, or there are any major natural disasters. In all, a relatively safe bet long-term provided you stock pick wisely.

Oil - Some huge price gains have been seen on oil in recent years, largely due to the fact that oil prices are not just controlled by supply and demand, there are political overtones involved too making oil a difficult one to predict accurately. On the whole, oil will rise in price long-term, I don't think we need to wheel out any rocket scientists to tell us that, but, whether it rises astronomically depends on a few other factors. The emerging economies - (even if you just take the BRICS) have sizeable untapped oil deposits at their disposal, and the BRIC countries are now beginning to haul in enough external cash and investment to be able to develop and extract those reserves to subsequently export.

The question will be here whether these developing economies actually export as they extract to keep the general price under control, or if they sit on it to allow them to manipulate the market at a later point when prices are through the roof (in the same way Russia has done with palladium exports in the past).

Gold - As frequent readers will know, I tend to comment on the gold market quite a bit, and as much as I have annoyed a few gold bugs out there, I will do it again. Gold may well rise a little further in the next 12 months or so, but this will not continue. Why? There are too many major players out there with more money and power than most of us can begin to imagine. With gold investment being so diverse and yet connected at the same time it won't be long before a few of the major players (either individuals or under the guise of funds) go to market on the short side (selling large numbers of positions into the market and buying it back at a lower rate at a later date).

When this happens - it will be one of the largest market shocks the world has seen, the physical price will plummet, mines will start to close and many will be caught short (pun intended). Physical delivery will be demanded by the public, which likely won't be able to be met and the Great Gold Depression will begin. It will recover, but it will be a decade or two before we see a return to current prices.

Property - Being in the property industry I am of course expected to have some bias here, but I will nevertheless put forward my opinion on the property market's future for the long term. In developed countries where prices have dropped in the past few years (such as the UK, USA, Ireland etc) expect further falls. How large these falls are largely depend upon lending more than anything else. Pseudo money lending (which seems to be all the rage in the UK at present) will only artificially support house prices.

Once lending is restricted and regulated properly, only then will the markets correct themselves. In developing countries with fledgling property markets (China, and Brazil) I think we can still expect to see further growth for a couple of years, but then stabilising as the markets begin to settle. The former booming property nations that were all to keen to invest in foreign markets are far more cautious than they were - as a result the developing countries will see their markets manipulated far less by foreign investment.

The holiday property markets that have suffered (Portugal and Spain etc) also have some way to fall yet for most sectors. That's not to say there are no bargains to be found yet because there are, but holiday home owners don't tend to need to sell, hence prices appear to be expensive still on average when in reality if you look hard in these countries you can find property that is well priced now, and still will be in 2 years time even if prices fall another 30% or 40%.


Which do you think will be the strongest performing asset over the next 7 years?

- Monday 21 March 2011

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