Smart money paying close attention to signals of an upswing

View From Here The point is not to stay out of bubbles. It's to make sure you get in before it begins to form.

Personal finance fads, like fashion, change with the seasons. Lately, in the eternal debate between renting and buying property, it's the renters who are queens of the catwalk. So it stands to reason, the smart money says buy.

I would not have the courage to say the market has turned. But when everybody begins talking up a particular strategy, it's time to keep an eye on the door.

Property, for instance, has been on its knees so long it can barely attempt to stand up. The general theme for financial advisers is to rent for now - and let the great big pile of overpriced bricks you shelter in be someone else's problem.

But when a particular class asset has been abandoned by all, in all likelihood it is time to reconsider it. My feeling is that property is always a good investment. Once paid off, you have an inflation-beating asset that you can sell to fund your retirement.

Paying rent when you are 90 will not seem like such a good idea at all. You don't need to be an actuary to know that inflation is going to eat your savings while pushing up the cost of the basic necessities, such as shelter.

As an expat, it makes sense to buy a property back home, rent it out and some day you have an asset to return to. There's never a better time to buy property than when you are employed and can afford to make payments.

Because as sure as the property bubble burst, so it will inevitably recover again. Stock-market investors are especially aware of this. This, as they say in the markets, is what the smart money does.

As important as it is to know when to quit, it's when to get in. This month, LinkedIn became the first social networking site to launch an initial public offering (IPO). Floated at US$45 (Dh164.35) a share, it almost instantly hit $83, and eventually touched above $122. At the close of the day, LinkedIn was valued at $8.9 billion - not bad for a company that delivered less than $16m the year before.

For holders of the stock, the day would have ended very well indeed. But not as well as early investors who bought shares privately for as little as $18 in the year leading up to the IPO. This was the true smart money. These investors took a risk by getting in early and tying up capital before the IPO.

If I was holding LinkedIn stock now, I would be very, very nervous. The point is not to stay out of bubbles - if this is indeed the beginning of a tech bubble as many seem to say. It's to make sure you get in before it begins to form. Then take a profit even if it means getting out too early.

Another early entry may be, of all things, US consumer stocks. This is clearly not their time. Rising inflation, high energy costs and persistent unemployment have kept US shoppers at home.

But an intriguing note is creeping into financial news coming out of the US: manufacturers are growing tired of their China journey and are bringing factories back home. Caterpillar, the company that makes those really cool digging machines, is shifting production back to the US. So are others.

It might be too early to point to a renaissance of US manufacturing, as some reports, notably by the Boston Consulting Group, have done. But the drive offshore seems to have slowed. More factories in the US means more workers. And more workers means longer queues at the tills.

Getting in now could be the smart thing to do. Or it could not. Which is why the smart money never goes all out in a speculative play. This is not the time to borrow money or risk retirement funds by thinking you can see the future.

But if you have a little spare cash, this could be used for a smart-money play. A regular monthly investment in an exchange-traded fund with exposure to a sector you think will come good in a few years is one way to do it.

Joseph Kennedy, the businessman and father of US president John F Kennedy, famously escaped the 1929 stock crash when his shoe shine boy began offering him investment tips. At some point in the years that followed, however, Kennedy began buying again.

I bet it was about the time his shoe shine guy was telling him the market was never going to recover.

Gavin du Venage is a business writer and entrepreneur based in South Africa