Market Expects RBA to Cut Interest Rates Next Week

Market’s had another good session overnight. The panic of August and September seems to be fading. Why is that, do you think?

John Hilrenrath from the Wall Street Journal provides the answer…

The chances of a Federal Reserve interest-rate increase in 2015 are diminishing amid new signs of anemic economic activity, a disappointing development for central bank officials who have been hoping to move this year after a prolonged period of easy-money policies.

Sentiment in the Aussie market is improving too. And for the same reason. The market expects the RBA to cut interest rates, possibly as soon as next week.

This is all part of the global currency wars. Lower interest rates mean a weaker currency, which is a way for countries to ‘steal’ demand from others.

But when the chief proponent of the currency war is the country with the world’s reserve currency — the US — it causes all sorts of problems. These problems unfold slowly and deceptively.  As Strategic Intelligence editor Jim Rickards explains in his essay today, currencies lose their mantle over many years, not in days or weeks. Jim writes:

the replacement of sterling by the dollar as the world’s leading reserve currency was a process that took 30 years, from 1914 to 1944.

Hmmm. That was a pretty eventful period, wasn’t it? Two world wars and an epic stock boom and bust, followed by the greatest economic depression seen in the modern world. It’s no coincidence that these events unfolded as the world entered a type of currency vacuum.

Keep this in mind as you read Jim’s essay today. We’re in the early stages of another global currency vacuum. What that will bring is anyone’s guess. But it won’t be pretty. To deal with this evolving investment environment, you need to evolve too.

That means doing things differently and being willing to try new approaches. What worked in the past won’t work in the future. For a start, you could do worse than to have Jim as your guide. Keep an eye out for his essays over the next week or so to get your thinking on the right track.

Regards,

Greg

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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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