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Are you ready for the American rate rise?

Discussion in 'Property Market Economics' started by Till Kingdom Come, 31st Jul, 2015.

  1. Till Kingdom Come

    Till Kingdom Come Well-Known Member

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    one of the reasons why Australian borrowing is cheap is the extraordinary monetary stimulus provided by the US Federal Reserve.

    with the impending US Fed rate hike (as the US economy strengthens), probably this September or December, there is a good chance it's going to affect Australian funding costs as well (Australia being a current account deficit country with huge reliance on international wholsale bank funding).

    now that the interest rate drinking party is about to end, are you prepared to nurse the hangover?
     
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  2. jaybean

    jaybean Well-Known Member

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    Yup all prepared. I've refinanced everything for the next 5 years IO, and have locked in all my rates. Just one refinancing to go, hopefully it's not too late.

    I've already got some US currency and shares and I hope to increase that over the next few months as a hedge. This is in addition to some final equity releases and trying to save more overall.

    I have no idea what to expect, but I figure if I plan for the worst, then I should emerge ok 5 years from now.
     
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  3. Aaron Sice

    Aaron Sice Well-Known Member

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    we all realise that a rate hike in the US could be a little as 10 basis points, yes?

    0.1%?

    might cause a ripple - but certainly nothing to write home about.

    they may even try for a whopping 15 basis points - but what would rely on employment data.
     
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  4. Till Kingdom Come

    Till Kingdom Come Well-Known Member

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    The point is, people should not assume rates will be low forever. The way investors are vehemently reacting to recent rate rises by lenders, shows how unprepared they are even for minor bumps.

    When rates eventually rise, those who have been hoping cor good capital gains will be disappointed.
     
  5. 2FAST4U

    2FAST4U Well-Known Member

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    It wasn't the rate rise it was the fact that the rate rise was only attributed to investors that caused the uproar.
     
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  6. willair

    willair Well-Known Member Premium Member

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    It may also works the other way in the USA, the inevitable rise in rates over the next few years plus the massive purchases of long term bond yields over the prior 5 has also banged up US stock market prices and inline owner occupied homes values, now they have have more spending power with overvalued assets that don't line up real inflation adjusted GDP,just look up where the current bond yields are now and what they will have be as interest rates rise ,something not right
    but we think and act different..
     
  7. Bayview

    Bayview Well-Known Member

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    USA? The joint was heading around the S bend when I was there, and they aint changed much since.

    They have a middle class which dwindling, and is broke, a huge homeless and low-paid worker base, astronomical and unaffordabe health care, real wages have gone backwards for the last 30 odd years from memory, a do-nothing Congress whose only interest is keeping their status quo, an escalating military budget and costs related to that outfall, and they are like Aus where they export bugger-all and import almost everything.
     
  8. 2FAST4U

    2FAST4U Well-Known Member

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    Sounds like Australia's future;)
     
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  9. Till Kingdom Come

    Till Kingdom Come Well-Known Member

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    I doubt they will react differently it was across the board. Or it could be a deeply rooted sense of entitlement from investors who think they are superior class of borrowers.
     
  10. Till Kingdom Come

    Till Kingdom Come Well-Known Member

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    Bwahahaha

    At least America has the ability to virtually print money without much of a mess. Being the ultimate reserve currency they have.
     
  11. Aaron Sice

    Aaron Sice Well-Known Member

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    great.

    so make the point you want to make without the scaremongering replybait filler material.
     
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  12. Till Kingdom Come

    Till Kingdom Come Well-Known Member

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    Nice "stick head in sand" strategy
     
  13. Aaron Sice

    Aaron Sice Well-Known Member

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    hahaha sure, okay, whatever.
     
  14. jaybean

    jaybean Well-Known Member

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    You can learn something from him if you stopped to listen. He said, and I quote:

    I bet you didn't know - even as a seasoned investor - that interest rate increases could have an adverse effect on you? Humbleness my friend...learn some:)
     
  15. Aaron Sice

    Aaron Sice Well-Known Member

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    Okay - for the benefit of PC'ers - have a look at my posts on this very matter over on SS. I understand the effect US monetary policy has on Aus - in fact I was only talking about what could likely happen one day and it happened the very next day.

    Rate rise speculation was rife - I said if rates rise, expect a bank sell down.

    http://somersoft.com/forums/showpost.php?p=1283488&postcount=27

    Just the "whiff" of a rise in the US and Aussie banks were sold off the next 48hrs.

    I'm not disagreeing with anything said, only the manner in which it was presented - Clickbait / Replybait etc etc.
     
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  16. jaybean

    jaybean Well-Known Member

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    lol if you're responding to my post, it was sarcasm:) I was surprised to see the gist of his post was that interest rate rise = risk. Wow, like we didn't know that.
     
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  17. Aaron Sice

    Aaron Sice Well-Known Member

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    oh.....look, I'm pretty highly strung - so sorry about that.
     
  18. barnes

    barnes Well-Known Member

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    Higher rates in US will be great. The sooner - the better. :)
     
  19. Big Red

    Big Red Well-Known Member

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    It is only a matter of time before the rates do go up. I feel that the Fed is playing with words and promising and not delivering. Sort of like the boy who cried wolf.

    However, I dont see how the US is any better off compared to when they were in the GFC.