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RBA - cash rate - record low of 2 per cent
marketwinner
post Posted: Aug 21 2016, 11:02 AM
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In Reply To: nipper's post @ Aug 20 2016, 12:24 PM

Will Australia too end up with negative interest rates?

 
nipper
post Posted: Aug 20 2016, 12:24 PM
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In Reply To: nipper's post @ Aug 20 2016, 11:46 AM

while the usual rabbits are out and about, repeating the conventional wisdoms
QUOTE
We will also look back on this period, with more than 30 per cent of global bonds paying negative yields, and 80 per cent offering returns of less than 1 per cent, with equal astonishment.
- Montgomery
QUOTE
Central banks across the developed world have turned the prudent investor's favourite financial asset – government bonds – into at best a poor option and at worst a ticking time bomb. Which means playing it safe has never looked more dangerous, and that presents a big challenge to those looking to lower the risk of their portfolios. Bonds – the traditional diversifier – have "much less scope" to cushion the blow to your portfolio from a major sharemarket reversal, Schroders' head of multi-asset Simon Doyle says.

AMP Capital head of dynamic asset allocation Nader Naeimi is more blunt: "At these levels, bonds are a liability in a portfolio. I much prefer to keep a bulk of my fund's defensive allocation in cash rather than bonds."
in AFR today

I prefer to find some comfort on observed reality, such as Gary Shilling http://www.sharescene.com/index.php?showtopic=16058



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

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nipper
post Posted: Aug 20 2016, 11:46 AM
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In Reply To: flower's post @ May 6 2015, 05:28 PM

now its 1.5%



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
flower
post Posted: May 6 2015, 05:28 PM
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In Reply To: alonso's post @ May 6 2015, 10:30 AM

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All in all, I think a further cut in the rate would be whistling in the wind or doing something else in the wind.

So--the RBA has now joined the world in depreciating the value of our currency to basically nothing, since inflation is running @ 2% the 2% cash base rate means our effective cash rate is ZERO.

Welcome to that brave new world of economic madness----- just ahead of the National Budget.

Everybody celebrating?

Retirees celebrating?

Mortgage holders certainly are--how many are preparing to lock in those rates?

What happens when inevitably our rates start to move UP?

Property now overvalued in several states, are those mortgage holders who won't lock in at today's rates ready for real financial hardship-- or worse-- when rates rise and property values plummet?

And the truly farcical fact is that against the USD, the AUD is RISING!!!! ----Today.
Attached File(s)
Attached File  dollar_up_may_6.gif ( 24.17K ) Number of downloads: 25

 




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Combining Fundamental comments with Fundamental charts.
 
aussie joe
post Posted: May 6 2015, 12:53 PM
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In Reply To: alonso's post @ May 6 2015, 10:30 AM

Interesting times.

Interest rates at record lows trying to stimulate the economy means the economy is screwed.

Not a good time to be investing. capital protection is the key in these uncertain times.

The RBA's of the world are forcing money out of bank deposits into riskier vehicles.

what to do is the question?













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alonso
post Posted: May 6 2015, 10:30 AM
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In Reply To: aussie joe's post @ May 6 2015, 09:44 AM

We have been almost daily bombarded with calls for the RBA to lower rates yet again. and now they've got their way.
I suspect most of these calls - and the prevailing sentiment created by them - have been coming from sectional interests. They may be based on honest beliefs that this would be good for the economy and the country generally but whether this is true or not is up for discussion.

The basis of the calls is that a further lowering of rates would give a boost to growth. But would it?
We have seen rates in Europe dropped to near as dammit to zero without any great effect on most economies. It might be said that the same action in the USA has seen an upturn in the economy, but has that been due to this or other factors.
The US has had a massive boost to the economy in the past few years from the shale oil & gas boom. It has also been impacted by money printing on a grand scale, which they now prefer to call quantative easing.

I don't know what the economists say in general . . .what they're paid to I suppose. But it seems to me there would be an "elasticity effect" with interest rate movements. When our rates came down from around 17% to say 10 or 12, I've no doubt that had an accelerator effect through the economy.
But a drop of .025% from an already low 2.25 (?), would that really stimulate anything?
It may give a marginal boost to the stock market and the housing market, but it would be marginal. So marginal that you would be hard put to measure it or even be sure any movement was due to that or something else. It wouldn't put much more discretionary income in the hands of the Little Aussie Mortgagor than a cup of coffee. (and they really should be getting that from an Aldi coffee machine anyway)

All in all, I think a further cut in the rate would be whistling in the wind or doing something else in the wind.



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"The optimist proclaims that we live in the best of all possible worlds. The pessimist fears this is true"

"What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom." Adam Smith

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aussie joe
post Posted: May 6 2015, 09:44 AM
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What are peoples thoughts?

Bubble brewing in property! Are we following Japan / America into the financial abyss?




http://www.smh.com.au/business/the-economy/reserve-bank-of-australia-cuts-official-cash-rate-to-record-low-2-at-may-meeting-20150505-ggueak.html

Reserve Bank of Australia cuts official cash rate to record low 2% at May meeting

Date

May 5, 2015 - 6:46PM

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    The Reserve Bank of Australia on Tuesday cut the cash rate to a new record low of 2 per cent, citing some ongoing economic weakness for its decision.

    The widely-expected quarter-point reduction, the second in three months, takes lending rates to the lowest point since at least the late 1950s.


    RBA governor Glenn Stevens. Photo: Christopher Pearce

    The Australian dollar immediately reacted, plunging more than US0.70¢ to US77.88¢.

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    However, it quickly recovered to a new day's high - of US79.05¢ - as details emerged on why the board voted to cut rates.

    RBA governor Glenn Stevens said the decision came despite some "improved trends in household demand over the past six months and stronger growth in employment".

    However, he added: "Looking ahead, the key drag on private demand is likely to be weakness in business capital expenditure in both the mining and non-mining sectors over the coming year.

    "Public spending is also scheduled to be subdued.

    "The economy is therefore likely to be operating with a degree of spare capacity for some time yet."

    The latest round of rate cuts, which began with February's drop to 2.25 per cent, is aimed at spurring business investment outside mining and encouraging the so-called "animal spirits" which create jobs and drive innovation.

    However, it could also further fan the flames of the hot Sydney property market and run the risk of creating a bubble.

    According to RateCity.com, Tuesday's cash rate cut will equate to home loan rates dipping below 4 per cent this month, the lowest on record.

    Peter Arnold, banking analyst at RateCity.com, said typical borrowers would save around $1200 this year on their home loan repayments compared with what they paid the previous year. For a lot of people in the capital cities it will be around double that.

    "It's not just the RBA who's been cutting rates; the lenders have been getting in on the action as well," he said.

    ANZ was the first of the major banks to announce its response to the Reserve Bank's cut, saying it would lower its standard variable home loan rate by 0.25 percentage points, effective this Friday.

    Tuesday's cut comes just days ahead of the RBA's quarterly statement on monetary policy, in which the bank will detail prevailing weaknesses in the Australian economy such as low commodity prices, the fall-off in capital investment, restraints on fiscal spending and relatively high unemployment.

    The central bank's language on Tuesday, however, appeared to suggest less of an easing bias, meaning this might be the last cut in the current cycle.

    Mr Stevens said "the inflation outlook provided the opportunity for monetary policy to be eased further, so as to reinforce recent encouraging trends in household demand".

    "This is likely to be interpreted by markets as a sign that the RBA believes it is near the end of the easing cycle," said Australia and New Zealand Banking group chief economist Warren Hogan.

    Other commentators disagreed.

    "Our forecast that both GDP growth and underlying inflation will be weaker this year than the RBA expects suggests that rates could yet fall to 1.5 per cent by December," said Capital Economics' chief economist for Australia Paul Dales.

    Aberdeen Asset Management Senior Investment Manager Jasmin Argyrou said "cautious and uncertain households mean rate cuts are less effective today".

    "Today's cash rate cut is unlikely to provide the boost to confidence and spending that it has in previous cycles," she said.


 
 



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