rates to be cut in 2015?

Deltaberry said:

If rates fall, prices presumably go up more. I'd consider cashing out some to reallocate to something else. Not saying I believe in doom and gloom from some other users, but if there is one more property run, I wonder how much more it can go up by in another 5 years.

I'd probably keep the AAA-class locations though since they only tend to come up once every 50 years, but just get rid of the A-grade, B-grade ones as they're not easy to get rid of in a flat or falling market.

Click to expand...

Great Deltaberry,
After all, no matter what the rates will be. As investor, it our call to adjust (adapt). You can't stop the rates going up/down.
If you can tweak the strategy to favour you, I believe you will surf the wave well

Some people will in trouble while they buy over limit/leverage. Some will do okay, and survive. Some will benefit the situation.

So if you think that way, what a great position to have that options

This is my take on things and to people who ask me, for the average joe buying your standard residential property for a long term buy and hold,

honestly, I tell them no one has a crystal ball, but looking at various markets in qld, nsw and vic, that as a whole, the market is pretty hot overall, next year who knows with rate cuts, what will happen if the rates stay the same?? what will happen if rates are dropped again??

generally lower rates stimulates growth, but are we basically flogging a dead horse and just extending the investible or cushioning the fall?

generally, these markets have done very well, so since every mum and dad is trying to buy now, will we see similar amounts of growth if rates stay the same, Id say damn unlikely, and what if rates do fall, will it be another 1-2 years of great growth and then an even longer plateau or fall

but regardless whatever happens, I think its dangerous to buy your standard buy and hold property unless its BMV or has development potential or is about gentrify or boom

thats why im very reluctant to go on a shopping spree right now,

however, people ask me, ok so shall I wait? again a very tough question !

I wish I had a crystal ball

Glenn Stevens has spoken...

http://www.abc.net.au/news/2014-12-12/glenn-stevens-talks-down-dollar-slams-politicians/5963060

IMHO Rate cuts not gonna make a difference when the global economy goes recession.

ZachAnSel said:

Great Deltaberry,
After all, no matter what the rates will be. As investor, it our call to adjust (adapt). You can't stop the rates going up/down.
If you can tweak the strategy to favour you, I believe you will surf the wave well

Some people will in trouble while they buy over limit/leverage. Some will do okay, and survive. Some will benefit the situation.

So if you think that way, what a great position to have that options

Click to expand...

Interest rate movements are an EFFECT and not a CAUSE. Work out the cause and you know what the next move/s will be.

KangaBanga said:

Glenn Stevens has spoken...

http://www.abc.net.au/news/2014-12-12/glenn-stevens-talks-down-dollar-slams-politicians/5963060

Click to expand...

From the article linked above:
Glen Stevens said:

However, Mr Stevens had less praise for the nation's politicians, saying many were ducking a serious conversation with Australians over the need to repair the federal budget over the next

"The past year shows that this is not an easy conversation to have. It's very difficult, and it will require strong political leadership I think, not just from the government, but from other political parties and individuals who claim to be serious," he said.

"You have to have a serious conversation about this stuff and not get into slogans and name-calling and that stuff. The serious issue is that five-year horizon."

Click to expand...

Yep, lets get serious about bringing the books back in order, no more mud slinging from Labor/Greens/minor parties.
They were rejected at the last election for the reason that they simply had no idea about managing the economy and bringing it to a healthy status, enough to cater for everyone. Not the rich v poor, but everyone inclusive.

Five year horizon eh.

Time to put political bias aside and work with the Libs who know how to get the budget back in order.

The Fence said:

.... and work with the Libs who know how to get the budget back in order.

Click to expand...

You're kidding ...(and I have no affection for either party). They're all a bunch of plonkers. Hockey couldn't keep the books for a pub chook raffle. NLP had the right idea but the implementation was abysmal.

This mob of poly's have no experience managing a deflating economy in a global sea of hurt.

I just had some sort of intellectual orgasm just reading the transcript of the AFR interview with El Capitan Stevo: http://www.afr.com/p/national/glenn_stevens_interview_the_full_FiihZ41I8IrOls4Yh6D8wK

From that interview, it seems he wants the exchange rate to do the heavy lifting, instead of cutting rates which could cause roller-coaster conditions rather than a stable economy.

The U.S. Federal Reserve are expected to raise their rates in mid-late 2015 as their economy is performing well. I believe the RBA will be patient enough for this to happen (what's a few months anyway) and will cause the AUD to fall further.

The other issue is, our banks are very dependent on foreign wholesale funding. If the U.S. Feds interest rates go up, we can expect our banks to have higher cost of funding as they will be competing with US Treasury bonds and stuff like that. As we know the USD is the world's premier reserve currency and a little increase in their rates can cause funds to gravitate towards US debt securities. Even if the RBA wants to cut rates, the banks will have limited choice but to pass on a little cut only because they need to maintain their interest margins (especially now that the Murray inquiry has flagged increasing capital requirements which will eat into the margins of the banks).

As well if you look at the ABS data, NSW is doing quite well. NSW contributes approx 1/3 to the national economy, and it's the resource states that are suffering because of commodity prices. What El Capitan is saying, however, is that the iron ore prices are going down because we're selling more of it, so the volume of production compensates for the lower price. It would be worrisome if the extra supply is coming from other countries, but in reality most of it comes from Australia so there's really a counterbalancing act happening.

In short, in my opinion there is strong reason to believe the RBA will be patient and wait for the U.S. Feds to raise their rates so it will cause the AUD to come closer to 70-75 US cents which will be enough reason for the RBA to maintain their message which they have been saying for many months now: "the most prudent course is likely to be a period of stability in interest rates".

This part of the interview tells me Mr Governor is not too worried about the iron ore price (which was the reason why some commentators were saying the RBA will cut rates). I don't think the RBA will cut rates because of falling iron ore prices.

AFR: As you know, the terms of trade are always a big topic in Canberra in terms of the effect on the budget. A bit like the oil story, you've got supply boosting shipments of iron ore and coal from BHP and Rio Tinto. How much is that playing into the weakness in prices?

MR STEVENS: Clearly, supply is a big factor here -- and it's our supply, as it turns out, or a couple of our major companies' supply. So, if you thought there was going to be a higher level of long-run demand and quite rapid growth in the short run of demand, and asked, who is going to be the guy that gets to supply that? It turns out it was us. Which has to be better than some of the alternatives of letting suppliers located in other countries get it. So that, it seems to me, has been a positive for Australia. The prices have come down quite a lot lately and probably not many people will have predicted the extent of that in such a short time. I'm no expert in the economics of iron ore but my understanding is certainly those two large producers are still quite profitable at these prices or even lower.

What other things are going on in that market, in terms of strategic behaviour and so on? Well, you know, I'm not qualified to really comment on that. But the big picture is, I think; there has been a step-up in the global demand for these products. Sure, we can't be 100 per cent certain exactly what pace that will grow in the future. But there has been a big step-up in that demand of historic proportions and it turns out our companies are leading the charge to be the suppliers. That's a good story, isn't it?

Click to expand...

Falling iron ore prices is not an issue if A$ is 75c.

At US$70/t, it translates to around A$90/t of iron which means all the existing producers should be profitable since they produce at around A$40-60/t (and A$60/t is for high cost junior producers like Atlas Iron). And Stevens is right about marginal supply coming from Australia. Of the top 4 producers which make up probably 40-50% of the world's iron ore supply, 3 are Australian (our very own BHP, Rio and Twiggy).

QLD will be harder hit with thermal coal. At US$60/t, that translates to around A$80/t. A lot of producers like Peabody, Anglo, Vale etc operate mines with C1 cash costs of around A$65-75/t. The question will be whether GLNG, APLNG and QCLNG can cushion the QLD coal slump.

Victoria and NSW benefits from education, tourism, agriculture and Chinese seeking places with air pollution below 50 index points.

Lastly, our terms of trade from a volume perspective has not declined. The Chinese are going to buy more coal and iron ore in 5 years time from Australia. And beef etc. The problem right now is, they're not building new mines, meaning there's less construction jobs going around to kick start mines. And LNG is coming off the construction phase too. What do all these people at Leightons and Downer EDI do now? I'd be shorting those stocks now if it were me.

KangaBanga said:

IMHO Rate cuts not gonna make a difference when the global economy goes recession.

Click to expand...

Our biggest trading partner China will not be in recession - maybe a bit of slowdown but not recession. And let's not forget it's a centrally planned authoritarian government with strong control over the economy. Also USA is doing well which is great for global economic confidence. And not to forget, oil prices are down for some time yet and this is a significant boost to non-oil producing countries.

The dark horses are Europe (we don't have that much trade with them anyway) and Japan (well it's been stagnant for decades - what's new?).

I don't get why people think we are going to the dogs soon - we have strong economy outside the small miners (BHP and Rio are still quite profitable). The biggest state NSW is doing well with the Libs in charge (thank God we got rid of the directionless NSW-ALP with a resounding margin) and this state contributes 1/3 of the national economy and is worth more than 3x the entire mining industry.

And if the AUD goes down as the US Feds increase their rates this will definitely help our local industries compete with foreign substitutes - manufacturing, tourism, education, retail - as long as it does not cause too much inflation (luckily oil prices are down and wage growth under control).

unloadmymind said:

Our biggest trading partner China will not be in recession - maybe a bit of slowdown but not recession. And let's not forget it's a centrally planned authoritarian government with strong control over the economy.

Click to expand...

Maybe this interview with someone who works and lives there and has an intimate knowledge of how things Chinese work will realign your thinking somewhat.

wow, pretty good article laying it out the situation in China as is...

KangaBanga said:

wow, pretty good article laying it out the situation in China as is...

Click to expand...

Ditto ..top post. Kudos deserved and sent ! LL

Freckle said:

You're kidding ...(and I have no affection for either party). They're all a bunch of plonkers. Hockey couldn't keep the books for a pub chook raffle. NLP had the right idea but the implementation was abysmal.

This mob of poly's have no experience managing a deflating economy in a global sea of hurt.

Click to expand...

Oh dear, I'm agreeing with Freckle... whatever next

I'm personally just hoping for stability, but I have no idea what will happen in the next year or two. I actually anticipated (to a degree) the GFC based on the fact I felt it had to come based on people's behavior (if only I could have anticipated the timing), but now I really can't get a handle on where we go next

Jaggannath said:

Oh dear, I'm agreeing with Freckle... whatever next

I'm personally just hoping for stability, but I have no idea what will happen in the next year or two. I actually anticipated (to a degree) the GFC based on the fact I felt it had to come based on people's behavior (if only I could have anticipated the timing), but now I really can't get a handle on where we go next

Click to expand...

Yeah agree. The GFC arrived pretty much on time, maybe just a little late. But we seem to be having quite strange mini-booms and busts in our housing and stocks now and
My feeling is that we'll follow the rest of the world's modest recovery after a few neurotic months.

WattleIdo said:

My feeling is that we'll follow the rest of the world's modest recovery after a few neurotic months.

Click to expand...

The worlds economies aren't recovering...the opposite and they're worse now than they were pre GFC.

There's a trillion $$$ plus at stake in energy infrastructure spend (globally) at risk and literally billions in debt that funded the shale expansion. At current oil prices and falling I expect to see a GFC event occur in the US by mid 15 if not earlier. Counterpart risk is huge.

Throw in the collapsing ruble and the isolation of Russia and you have the makings of something bad.

I'll be amazed if we get through 15 without something turning to custard.

Freckle said:

The worlds economies aren't recovering...the opposite and they're worse now than they were pre GFC.

There's a trillion $$$ plus at stake in energy infrastructure spend (globally) at risk and literally billions in debt that funded the shale expansion. At current oil prices and falling I expect to see a GFC event occur in the US by mid 15 if not earlier. Counterpart risk is huge.

Throw in the collapsing ruble and the isolation of Russia and you have the makings of something bad.

I'll be amazed if we get through 15 without something turning to custard.

Click to expand...

That's the best item with "probability",something may well happen in the future ,when people start confusing reality with myths from what can see In front of me not many bonds are trading no where near their default value,Russian Bonds maybe a different story ..

Freckle said:

The worlds economies aren't recovering...the opposite and they're worse now than they were pre GFC.

There's a trillion $$$ plus at stake in energy infrastructure spend (globally) at risk and literally billions in debt that funded the shale expansion. At current oil prices and falling I expect to see a GFC event occur in the US by mid 15 if not earlier. Counterpart risk is huge.

Throw in the collapsing ruble and the isolation of Russia and you have the makings of something bad.

I'll be amazed if we get through 15 without something turning to custard.

Click to expand...

so opinions on investing for 2015? stock, housing, gold, or nothing?

skuzy said:

so opinions on investing for 2015? stock, housing, gold, or nothing?

Click to expand...

Anything military is a good bet, a bit of PM maybe 15 - 25% and around 20% cash.

Depends on how hard you want play and your risk appetite. It's not really an investors market. More like a speculators market

Freckle said:

Anything military is a good bet, a bit of PM maybe 15 - 25% and around 20% cash.

Depends on how hard you want play and your risk appetite. It's not really an investors market. More like a speculators market

Click to expand...

"We' are out of Iraq and in the process of getting out of Afghanistan. Compared to the last ten years, the military big bucks have been spent. The prospect of Hildebeast being elected won't help the 'Defence' industry one little bit either.

Buying Military related stocks is downright dangerous. In any event, some of the larger 'Defence" stocks like Boeing et al are so huge that its almost impossible to see them doubling anytime soon.