Don’t Count on The Reserve Bank of Australia Raising Rates

Despite the warm glow of a new round of QE from Europe, the price of Australia’s most important commodity continues to sink. It fell a massive 4.3% yesterday to $63.54 a tonne.

That’s because the outlook for China’s property construction sector is poor. The demand for iron ore is just not there. In a signs of things to come, Shanghai just abandoned its official economic growth target for 2015, suggesting China will no longer rely on the ‘growth at any cost’ method that was so bullish for iron ore in years past.

The poor outlook for iron ore has the market punting on the Reserve Bank of Australia cutting interest rates in Australia next week. After all, Canada put in a surprise rate cut last week due to the precipitous fall in the price of its major earner, oil. Apparently, that means Australia will surely do the same.

As I wrote last week though, I’m not so sure you’ll see an interest rate cut next week. Just because the market is desperate for one and thinks Glenn Stevens should join in the currency wars, doesn’t mean we’ll get one.

Up until now, all the language coming from Stevens suggests interest rates are on hold. He may change that wording next week, but to reduce rates ahead of a change in language would be an unusual move for Stevens.

Let’s wait and see…

Regards,

Greg Canavan+
for Markets and Money

P.S. If you haven’t already seen my report on the one Aussie stock that I think will have a massive year this year, based in part on the benefits of a weaker Aussie dollar, click here.

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Greg Canavan is a Contributing Editor at Markets & Money and Head of Research at Port Phillip Publishing. He advocates a counter-intuitive investment philosophy based on the old adage that ‘ignorance is bliss’. Greg says that investing in the ‘Information Age’ means you now have all the information you need. But is it really useful? Much of it is noise, and serves to confuse rather than inform investors. And, through the process of confirmation bias, you tend to sift the information that you agree with. As a result, you reinforce your biases. This gives you the impression that you know what is going on. But really, you don’t know. No one does. The world is far too complex to understand. When you accept this, your newfound ignorance becomes a formidable investment weapon. That’s because you’re not a slave to your emotions and biases. Greg puts this philosophy into action as the Editor of Crisis & Opportunity. He sees opportunities in crises. To find the opportunities, he uses a process called the ‘Fusion Method’, which combines charting analysis with more conventional valuation analysis. Charting is important because it contains no opinions or emotions. Combine that with traditional stock analysis, and you have a robust stock selection strategy. With Greg’s help, you can implement a long-term wealth-building strategy into your financial planning, be better prepared for the financial challenges ahead, and stop making the same mistakes that most private investors do every time they buy a stock. To find out more about Greg’s investing style and his financial worldview, take out a free subscription to Markets & Money here. And to discover more about Greg’s ‘ignorance is bliss’ investment strategy and the Fusion Method of investing, take out a 30-day trial to his value investing service Crisis & Opportunity here. Official websites and financial e-letters Greg writes for:

 


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