In the December Parachute we suggested that one of the signals that it may be time to do a bit of investing would be when local term deposit rates go under 5%. They are just about there now but their popularity remains (reportedly 10 million accounts open) as Australians are scarred from the GFC and choosing the safe road. No surprise, as it was a huge event that was expected to damage confidence for many years.
But sooner or later the ‘Wall of Worry’ will be climbed and money will be made by those who gather themselves early.
We have been reading a lot of broker research on ASX companies and these analysts are starting to sound quite ‘peppy’. Serious analysts aren’t known for great outpourings of emotion (except when it turns out senior management teams have lied to them, which is quite often!), so when you start reading their fruity adjectives about the bargains they are finding, it’s time to put your own periscope up! Just lately some of their assessments of companies in this bargain category are offering quite predictable annual earnings of around 20-25% of their share price (PE of 4-5x).
Not as safe as term deposits, but a compelling option for the brave ‘early’ punters.