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50 basis points, why?

Discussion in 'The Economy' started by wdongli, 1st May, 2012.

  1. wdongli

    wdongli Well-Known Member

    31st Mar, 2010
    Before RBA made its move on interest rate this afternoon, there were plenty of guesses, complain, opinions, and curses about the rate and economies.

    At last we have got 50 basis points and it is much better than anyone's expectation but at least not the former RBA governor, John Macfarlane, who urged the rate to be 50 basis or more.

    I did feel 50 basis was a right choice too before RBA meeting. The reason is RBA should not follow the market and media sentiment but trump the crowd and lead the market and media.

    1. GFC has its ripples in EU, China, Australia, and everywhere, which damaged the economies except mining sectors. Nowhere seems really good.

    2. China slowing down would take some time and when the high speed economy, mining, slow down, the further downward risks are very high.

    3. If the fear could not be stalled on, a deteriorated self-fulfilled loop would have had chances to formed. Inflation rate and crying of other economies have provided enough room to shock the people's minds toward better economy movement.

    4. Philosophically, 25 basis points were what market and economists expected, and this value could not let the people have too much hope. Sentiment low need high spurs if nothing out of control. So if RBA didn't want to seen mining would not go hot booming while others drop into the doorstep of heel.

    5. If this 50 basis point is too much and force the economies, markets, and medias to get their hot head, RBA could push or pause the rate there. Anyway, the economy is not in over expanded stage, red hot, and inflation very benign.

    Good rate move even we don't know economics very much. If history repeatable, economy downward usually last much longer than people's expectation. RBA should led the fighting to hot red or white cold.

    Just feel funny to hear Wayne Swan said the government's efforts for surplus have made it possible.

    What for what?

    RBA did this due to its diligence and intelligence in my views. I just could not see the benefit the government spread the money in GFC national widely in GFC bust time, which could be spent much better.

    By the way news said Union's staffs have been paid by $300,000 at national level. Are they work for the workers or themselves? They get some very good jobs paid by the workers!

    These pig chiefs! They tend to say and do different.

    Audio news about these pig chiefs could be found by search words "Unions need uniform national probity." If no laws on them they would drink the bloods of the workers.
    Last edited by a moderator: 1st May, 2012
  2. grinners

    grinners Member

    23rd Feb, 2012
    Melb, Vic
    Another bonus for the perpetual debtors and a 'serves you right' for savers...
  3. wdongli

    wdongli Well-Known Member

    31st Mar, 2010
    Much more than the bonus for the perpetual debtors...isn't it? Whom are you and what position do you hold? Could we be debtors when the market reward them or be the savors...

    We would be hurt if we just hold one position without wisdom and intelligence of the ever-changed environment, the economies, crowd sentiment, and our own affordability for the risks in a profit position let alone if we have been in losing positions. We need sharp eyes and brains based on solid mental framework.

    Portfolio management mainly is to get position to hold more bond-type or stock-type assets. It seems true sometimes the market rewards the risk takers and sometimes it rewards the cautious players. However at last you should make your bond type and total assets more and more in worst case.

    How to control the ratio between the bond and stock type assets? I have read some but enough.

    1. national economic output is below trend let along XAO has paid back all of premiums back accumulated in so-called resource booming in the dream land.
    2. a high Australian dollar, which means international traders feel OK to Aussie economies but everyone just simply deserted the Aussie stocks. Who makes the economies go?
    3. controlled inflation which come from worries. In worries everything should be depriced.

    RBA hold the rate high due to the worries on the booming. RBA reduces the rate to get the crowd hopeful. It is cruel you beat the crowd dog when they are in the attrition. RBA seems really don't care any specific savers or debtors even collateral damages to someone for any its action.

    So rate cut is good or bad to you is the most important matter as little traders or investors. Your task is to roll your snow bigger. Could you?

    Everyone should has his own focus. What's RBA's job?

    It’s job is to provide the necessary expansionary or contractionary stimuli to keep the economy on an even running. In my primary English words, its job is to hit the possible over done in both the booms and the busts.

    So it is reasonable to say the economies seem go down too much than RBA would like to see. GFC has passed by for 4 years more or less. Could XAO back to 5000 very soon?

    What's your position? Are you safe and ready to ride on upward wagon?

    Aussie dollar is too high and even the rate cut could not drive it down too much.

    Why? All said Aussie deserve a punch such as this sector collapse or another hopeless. Yes there are a lot of desperate sectors. Could Aussie dollar down to $0.49 again? A lot of Aussies are ready for it, aren't they?

    Read a lot of books but never ponder them good enough. It is my guess about the causes of the high dollars.

    1. Australia remains a stronger economy even all feel China crashes on every house here.
    2. The interest is still too high among the advanced economies or globally
    3. Aussie dollar needs some great shocks to change its course.
    4. We have too much the economic doldrums and before they gone the Aussie dollar should be hung over about 1:1 to US dollar.

    Businessmen can cry the foul of anyone. Savers could complain for the wrong policy to rob away their saving. But no one could run away from the basic.

    There are always have too much hopes and desperation. Too much is not healthy. All we know obesity. Too much hope and too muck hopelessness mean something wrong in you.

    Rate cuts seem could not drive the dollar down by itself. Do Aussies need a deep recession? It is really not what I worries about now. Am I safe? Am I ready for the chances for little risks?

    Unfortunately I am not and I could not go forward for the gold ahead which are ignored by everyone since they just don't want to see.

    Seriously I like RBA's independence and cautions very much. Traders in stock market are fight for themselves and their crying or cheering could not be counted as the signals to push hard on the rates.

    For 20 years there have been no recession, which is legend in this world where the crashing much more easier than anyone's imagination.

    My failures in last year and last decade tell the accuracy of adage: an ounce of prevention is worth a pound of cure. Some said I am making the wall. I do hope I could have the wall with these great wisdom accumulated in all of cultures.

    Don't forget what RBA can do is not what you can quite possibly! Don't forget in the summer if you are in a cold freezer, you would be in trouble. What should you do?

    1. learn to know the season transitions in the stock market
    2. calculate your step and the place you would like to put your toes on.
    3. don't be distracted from your calculated stride.
    4. stock market is inherently cyclical but its transition could be hard to pulse.

    Back to rate, we should take they are as normal, booms and busts, rate hikes and cuts. They always happen as your losses or profit based on your behavior and disposition.

    Read but don't ponder make fools. Rush to set up your winning flags make the slaughter table read for you. Foolish always takes away. If you lose, you are fool on somewhere and something. Check!

    What should you do in the noises around the rate cut? Like it to the crowd sentiment as a way to get some intelligence. Any more from it? No! If you expect and do more than you should do, you would pay the costs.

    Yes, we need to grow up in the stock market. we need to trade and invest diligently, paying reasonable prices for your value with enough margin of safety. Good brains make the profit even in worst cases.
    Last edited by a moderator: 3rd May, 2012