Tuesday, December 4, 2012

RBA cuts rates to 3%

  • RBA cuts 25 basis points to 3.00% rate which are historical lows
  • Asx200 closed -28points to 4503
  • Key concerns in resource strength, weakening
  • Aus rates are still high compared to global rates, ratio of imports are still high, AUD still strong,   1.045 after the announcement.
  • lower rates could be ahead
What now?

Lower rates, mean favourable valuations for both equity and housing; however, this is counter-cyclical to the actual weakening of the underlying economics - resources are peaking, unemployment can't get any better, retail data is weakening, housing prices are stalling/falling.  On the global front, US is facing long term GDP of zero, China demand is falling.

Asset Classes in Focus for 2013

Low rates are good for Gold (GLD, QAG etf's are the way to go), rounded off with exposure to OIL.

Should look for performance in bonds in early 2013, a continuation of current trends.

Equities will be stock specific, given the runup in prices in the Q3 of 2012.