22/09/2022
Quick update on major issues . FOMC early this morning , 75 bps hike . Which was 82% predicted by the market the other 18% was for 100bps. Markets actually took the news negatively which was the reverse of prior hikes (I know that makes 0 sense for market to be bullish in a hiking cycle) But take into account CPI data was released the week before which majority of people leaned on the side of a reduced print , it wasn’t , came in at 8.3 prior months was 8.1 …. Meaning inflation isn’t falling on a MoM basis , which in turn signals the cash rate might be set to rise above predicted levels.
Australia will have to maintain its rate rises to keep the AUD pegged to the USD+ the inflation rate of both nations . Look at currency’s that lack the will to tighten they’re getting slaughtered . Observe the Japenese yen to USD (jpy/usd) they’ve lost 22% of their value equivalent to the usd since Feb. With the debt to gdp ratios , privatized debt , ongoing supply chain restraints, possibilities of war , energy issues , manufacturing costs, large corporate layoffs starting to occur , forward earnings projections being dramatically cut and revised, Future EPS looking like a far fetched idea etc etc . I don’t see any bullish arguments making the cut . If you’re heavily exposed to financial markets …. R.I.P capital, GG super , home prices yadda yadda yadda . These issues take months to filter through and when the housing market in Aus eventually cracks which I’ve been on thst side of the fence for awhile all those paper gains and imaginary growth will crack with it. Retail spending will reduce with it and so will many jobs (which is what the RBA have been signaling is what they want )
Fuel excise is about to end and personally I think one of the main driving factors for lower oil prices is the US flooding the market with their SPR (strategic petroleum reserves) which is the lowest its been in many decades. They’ve also announced they’ll start buying oil when it gets to 80$ . Which was pretty crazy due to market speculators now knowing they can long oil above 80 and a floor has basically been put in by the United States government . Therefor creating a safe trade . Which in turn means it isn’t likely to go below 80$ anytime soon . As I’ve made clear in previous posts I think a long term trend is certainly underway for dense energy’s , oil, coal, gas etc . Therefor increasing manufacturing cost and Day to day living expenses for almost everybody. As much as everyone is crying about investment into green , clean energy . Without significant breakthroughs in technology a lot of people are going to be sitting in the dark come nightfall if we use current modeling and tech….. So basically nothing has changed in my opinion , long energy , short basically everything else . One decent piece of news is you can get 3%+ on savings rates or near 4% on treasuries so you’re only losing 3-4% per year . But you’d still be outperforming majority of index funds so might be something to consider , idk I’m not a financial planner . US 3’s -7’s isn’t a bad place to look.
Thanks for listening to my ramblings.
