Correspondence: Property and yield versus growth

One member asks about residential property, while another continues to hunt for yield.

Property puzzle

I would like to know Eureka Report’s thoughts on the outlook for the domestic residential property market.
Name withheld
Editor’s response: Thanks for your letter. We have filmed a number of videos on the property market that I think you may find of interest, including Investing in residential property and Property in the year ahead. Also, yesterday James Kirby, Brendon Lau and property syndicate expert Dugald Higgins filmed a webinar on indirect property investment, Property investment: Getting to know A-REITs and syndicates).

Yield versus growth

So much of the thrust of Eureka Report’s articles concern growth - understandably. Yet, a large percentage of the population is greying and looking for yield. Could you not appeal to retired investors with yield opportunities too?
Editor’s response: Thanks for your letter and feedback. Growth may have taken centre stage among investors for now, but there’s certainly still a place for yield, especially in a retirees portfolio. There are a few recent articles I think you may find of interest, including Australia’s top yield stocks and Stay with the yield play.

Best and worst trading days

Roger Wilson’s article, Don't pick the wrong lane, points out that if a trader missed the best 1, 5, 15, or 25 trading days their balance would be reduced by a significant percentage. This statistic is often quoted, particularly by fund managers, but I’ve never seen any statistics quoted as to how the return would be affected if the trader missed the worst 1, 5 etc trading days.

US default

In his article, A US impasse opportunity, Adam Carr expresses the view that the US cannot default because the Constitution provides that “the validity of the public debt of the United States, authorized by law ..... shall not be questioned.” I am no US constitutional lawyer, but what that says to me is that the validity of debt authorised - by Congress - cannot be challenged.  But until Congress authorises the debt, it is hard to see how that section of the Constitution helps the President. 


Adam’s response: Thank you for your letter. Your understanding of the law is mine as well. The law as stipulated only prohibits default on outstanding amounts (by definition). It is by another law that only Congress can approve additional amounts of debt. However, legal experts suggest there is a grey area where the two laws contradict each other. So for instance, what if additional borrowing is required to prevent default? The reason some suggest the President should, and is legally able to ignore the statutory debt limit in this instance, is because this entire fight is over funding that is already law. That is, 'Obamacare' has already been approved, passed and funded by Congress and upheld by the Supreme court.  On that argument, some members of congress are perhaps behaving unlawfully in now trying to deny funding to something that has already been lawfully funded. Their behaviour would almost certainly be unlawful if it then lead to people 'questioning' US debt. The President in that instance might be acting within the law if he instructs Treasury to temporally ignore the debt ceiling while budget negotiations continue.  That at least is my understanding. In any case, as I mentioned in my piece, there are many other legal options the President could employ to by-pass the debt ceiling - or he could balance the budget. Of all the options, a default is the least likely.  

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