Invest
Be wary of ‘hard-to-understand’ products
Ten years on from the global financial crisis, investors are being warned to be cautious of buying into products which are difficult to make sense of.
Be wary of ‘hard-to-understand’ products
Ten years on from the global financial crisis, investors are being warned to be cautious of buying into products which are difficult to make sense of.
Shane Oliver, the leading economist at investment firm AMP Capital has urged investors to be careful when investing in products created through “financial engineering” or which are hard to understand, noting similar products played a key role in the GFC.
“The GFC was the worst global financial crisis since the Great Depression,” he said.
“It saw the freezing up of lending between banks, multiple financial institutions needing to be rescued, 50 per cent plus share market falls and the worst post-war global economic contraction.”
This was spurred on by a “massive easing” of lending standards, allowing people to receive loans they were unable to service and packaging these loans with other loans to create securities to be sold to investors, Mr Oliver explained.
These products were then given good ratings as a low-risk investment “on the basis that while a small proportion of loans may default, the risk will be offset by the broad exposure”, and then sold to willing buyers under “fancy names”.
Not only did these products play a role in bringing about the subsequent crisis (which occurred after the US central bank drastically increased rates, leaving many people unable to pay their mortgages), but investors who held these particular products were also the most badly affected.
“The biggest losses for investors in the GFC were generally in products that relied heavily on financial engineering purporting to turn junk into [well-rated] investments that were impossible to understand,” he said.
Mr Oliver acknowledged that any potential future market crisis is unlikely to take the same shape as the GFC did, but warned there will be similarities.
“Of course there will be another boom and bust… but as Mark Twain is thought to have said ‘history doesn’t repeat, but it rhymes’ so the specifics will be different next time,” he said.
Property
RBA’s 30% property growth forecast to materialise in 75% of regions
Experts believe that RBA’s forecasted 30 per cent growth in property prices over the next three years will materialise in 75 per cent of Aussie regions. ...Read more
Property
HomeBuilder applications soar as first-timers enter the market in record numbers
Record numbers of first home buyers are coming into the market assisted by the government’s HomeBuilder stimulus, which is expected to help spur $50 billion in economic activity. ...Read more
Property
Dual Occupancy Homes – Why They Are A Smart Investment In The Current Market
Promoted by Metricon ...Read more
Property
4 factors affecting property market trends in 2021
Following a tough 2020, property investment activity is expected to rebound strong, expanding by 50 per cent in the second half of 2021. ...Read more
Property
House prices tipped to surge 30% on the back of cheap money
According to new documents released from the Reserve Bank of Australia, persistently low interest rates could push up property prices by as much as 30 per cent. ...Read more
Property
Double-digit price growth to stick around as ‘property boom’ arrives
According to leading indicators, Australia’s property boom officially began in November, following several slow months on the back of the COVID crisis, with double-digit price growth already logged ...Read more
Property
How to turn your ‘costly’ lifestyle investment into a money-making asset
Emotionally driven holiday home buyers are being advised to seek maximum rental income and depreciation benefits to make their investments viable. ...Read more
Property
Dutch e-commerce giant VidaXL ramping up Australian operations
Netherlands-based online retailer VidaXL is ramping up its operations in Australia, by launching the build of a brand new 81,000 sq m national distribution centre in Melbourne. ...Read more
Property
RBA’s 30% property growth forecast to materialise in 75% of regions
Experts believe that RBA’s forecasted 30 per cent growth in property prices over the next three years will materialise in 75 per cent of Aussie regions. ...Read more
Property
HomeBuilder applications soar as first-timers enter the market in record numbers
Record numbers of first home buyers are coming into the market assisted by the government’s HomeBuilder stimulus, which is expected to help spur $50 billion in economic activity. ...Read more
Property
Dual Occupancy Homes – Why They Are A Smart Investment In The Current Market
Promoted by Metricon ...Read more
Property
4 factors affecting property market trends in 2021
Following a tough 2020, property investment activity is expected to rebound strong, expanding by 50 per cent in the second half of 2021. ...Read more
Property
House prices tipped to surge 30% on the back of cheap money
According to new documents released from the Reserve Bank of Australia, persistently low interest rates could push up property prices by as much as 30 per cent. ...Read more
Property
Double-digit price growth to stick around as ‘property boom’ arrives
According to leading indicators, Australia’s property boom officially began in November, following several slow months on the back of the COVID crisis, with double-digit price growth already logged ...Read more
Property
How to turn your ‘costly’ lifestyle investment into a money-making asset
Emotionally driven holiday home buyers are being advised to seek maximum rental income and depreciation benefits to make their investments viable. ...Read more
Property
Dutch e-commerce giant VidaXL ramping up Australian operations
Netherlands-based online retailer VidaXL is ramping up its operations in Australia, by launching the build of a brand new 81,000 sq m national distribution centre in Melbourne. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
