Therefore, when property prices have risen too fast and too high, a wise investor might want to be cautious about the stock market as a property market crash would dampen sentiment on the stock market.
We could learn a lesson from Japan in the 1980s.
After excessive speculation -----> Property prices collapse
Nikkei average 39,000 ---------> Nikkei average 14,000
Reason:
- When property prices sky rocket, investors mortgage or sell their properties to buy shares ----> share prices sky rocket.
- When property prices collapse, investors sell shares to cover the house mortgage loan
- When share prices collapse, investors sell their properties to cover shares margin call.
Ref: Making Mistakes in the Stock Market by Wong Yee
No comments:
Post a Comment