Cash

[Superb Parrot]

Every time I'm in that boat it's the same, things look like they could tank any time so I dont make a move, the economy is looking sicker by the minute but the market keeps rising.

Good luck.........

Thanks, keeping cash now is like an aircraft in a holding pattern, safe but going nowhere.

I have no confidence in this market, for a long investor like me, strange signals are showing. CSL has just hit $46, and is a pure defensive play. It would surely come down if there was real confidence in equities. So, cash it will be for me until the signals change.

 

[Julia]

I disagree. Relative to the interest outlook for deposits I would say there is still some very good yields on offer, particularly if you can make use of the franking credits, which generally, any retired person should be able to do if they have organised their finances properly. I posted just a few as random examples in another thread just the other day. I'm talking about yields grossed up for franking credits around 8-9% I wouldn't be waiting too much longer though. Demand for good yielding defensives isn't going to go away during this current bull run.

How much account do you take of the global uncertainty and the increasing warning signs about the Australian economy? i.e. the potential for definite risk of capital loss in the share market?
Imo to focus just on the yield is very risky. I'd be very reluctant to put a large proportion of my available funds into the market under these conditions.

Should add the proviso that if you are generating a living from another source (eg salary) then that's quite different.
But if one is retired, capital preservation has to be a greater priority.

 

[Muschu]

I certainly have a different view.

Passive income is enduring wealth!

Capital burn is a funding source that exhausts at an increasing rate – Fine, if you have enough, die soon enough and don’t need/want to leave anything behind.

Apologies for being unclear. I intended to mean only two things:

1. It's OK [at least I certainly hope it is] for individuals to adopt differing investment strategies; and
2. Being wealthy in terms of dollars is not my prime objective.

 

[MrBurns]

Are there any circumstances where rates could go back to 10% ?

I think it's too much os a political hot potato as there are so many sucked into the inflated housing market that would suffer.

 

[prawn_86]

Are there any circumstances where rates could go back to 10% ?

I think it's too much os a political hot potato as there are so many sucked into the inflated housing market that would suffer.

Politics has nothing to do with it, the government doesnt control rates, although they do have an impact on the economy.

The RBA is mandated to keep inflation under control, so the only way now we would see a rate increase is if inflation (as measured/analysed by the RBA) was to increase outside of their 2-3% range, and look as though it was to stay there.

Those with better economics background could explain what causes inflation in detail, but essentially people need to start spending agin for that to happen

 

[MrBurns]

Those with better economics background could explain what causes inflation in detail, but essentially people need to start spending agin for that to happen

So the worse things get the less people spend the lower the rates......great

Well I sort of knew that but like a lot of others I'm getting sick of the continual reduction in rates and consequent decimating of income for those with cash.

 

[white_goodman]

Those with better economics background could explain what causes inflation in detail, but essentially people need to start spending agin for that to happen

largely yes but not necessarily, large inflation in input costs (oil) could force the hand of the RBA to raise rates which will be terrible for output, also there is a relationship between fiscal deficits and central banks stance on monetary policy (in theory)

 

[prawn_86]

Well I sort of knew that but like a lot of others I'm getting sick of the continual reduction in rates and consequent decimating of income for those with cash.

The joys of an ever changing World. For the first time i am seriously looking at property, with rates continuing to fall there are some properties out there that would be positively geared with a small deposit

 

[MrBurns]

The joys of an ever changing World. For the first time i am seriously looking at property, with rates continuing to fall there are some properties out there that would be positively geared with a small deposit

And then there's the property bubble.........if only we could look ahead.

 

[tinhat]

largely yes but not necessarily, large inflation in input costs (oil) could force the hand of the RBA to raise rates which will be terrible for output

If you look over the RBA's statements I think you will find that the most important cost push factor they consider is wages growth. In my opinion this is because wages growth tends to entrench inflationary expectations. My observation is that the RBA tends to ignore one-off inflationary shocks such as the GST and the carbon tax.

 

[prawn_86]

And then there's the property bubble.........if only we could look ahead.

Is it a bubble or is it stagnation? As far as i am concerned, if i can buy an asset with debt that pays itself off then that is a good deal providing:
1. The asset maintains or gains value
2. The income the asset produces is going to increase in time

So one then has to look at the asset and if conditions 1 and 2 are going to be met.

Positive gearing means that it now becomes like any other asset/business purchase as opposed to having to negative gear and hope for capital appreciation

 

[MrBurns]

Is it a bubble or is it stagnation? As far as i am concerned, if i can buy an asset with debt that pays itself off then that is a good deal providing:
1. The asset maintains or gains value
2. The income the asset produces is going to increase in time

So one then has to look at the asset and if conditions 1 and 2 are going to be met.

Positive gearing means that it now becomes like any other asset/business purchase as opposed to having to negative gear and hope for capital appreciation

Perhaps this s relevant -

https://www.aussiestockforums.com/forums/showthread.php?t=17967&p=731955&viewfull=1#post731955

 

[qldfrog]

largely yes but not necessarily, large inflation in input costs (oil) could force the hand of the RBA to raise rates which will be terrible for output, also there is a relationship between fiscal deficits and central banks stance on monetary policy (in theory)

I also want to add:
inflation can be linked to the currency;
if the AUD falls by let's say half, oil and related (ie food ,imports, etc) would jump; as Australia does not manufacture much anymore in a substantial manner, most of what you buy at the supermarket or even at Bunnings would double (or at least jump), even some food price would jump: why would a farmer sell in Oz if he can get twice on an oversea market

So inflation can be linked to currency;
in normal situation, the RBA would raise rates and so increase attraction of the AU dollar so would compensate, but not always as clear cut...
And guess what, the AUD is going down with the end of the mining boom..

 

[drsmith]

Are there any circumstances where rates could go back to 10% ?

When the bond market poops itself.

 

[MrBurns]

When the bond market poops itself.

Or when I dump all my cash into shares...........

 

[drsmith]

Or when I dump all my cash into shares...........

As a wise broker once said to me.........,

you're the investor.

5% on cash will still be easily attainable even after the latest RBA rate cut.

 

[MrBurns]

As a wise broker once said to me.........,

you're the investor.

5% on cash will still be easily attainable even after the latest RBA rate cut.

Nigerian bank ?

 

[Julia]

Nigerian bank ?

RAMS Saver (Base Rate 4.95%, Bonus 0.80% with savings plan) 5.75 Details
USaver (Base Rate 5.01%, Bonus 0.70% with savings plan) 5.71 Details
Citibank Online Saver (5.60% Variable intro rate for 4 months on balances up to $500k) 5.60 Details
Savings Maximiser (5.60% p.a. variable intro rate for 4 months on balances up to $250,000) 5.60

From Infochoice today. But, Burnsie, if you continue to sit on your hands, you will continue to miss opportunities as rates continue to fall. Only a few months ago you could have got over 6%.

 

[MrBurns]

Only a few months ago you could have got over 6%.

It's still only peanuts Julia, I need to make money and that means property or shares........

 

[Muschu]

It's still only peanuts Julia, I need to make money and that means property or shares........

Nothing in the market is risk free of course. But we have spoken of TLS. That's one risk I am willing to take over a term deposit.