Westpac's Bill Evans: 0.25% RBA cash rate by June 2020; QE to follow

One of the issues I see with employment are a number of companies outsource their work overseas, yet still charge a premium for their goods and services. So how does the govt. encourage spending when there are people without a job/not making enough to pay for these goods and services which are no longer produced locally?

 

Quantitive Easing reduces the value of money. Buying assets is a good way to keep the value of your wealth.

 

The economy here is booming (we live in New York).

Low unemployment really is lifting all boats fast here (some more than others). Im a little concerned about the stock market being over-valued but i think whilst there might be a small drop in Jan post tax-that its pretty much on upward trajectory unto March when we get the Super Tuesday results.

 

Well the economy here in Sydney can’t be doing too bad either. Just last week I walk into the Rolex flagship store in Sydney CBD and there’s barely any watches in the cabinets. I ask the guy behind the counter where are all the watches? Everything is sold. He tells me this is actually a good volume of stock at the moment. They have months where they almost have nothing to sell.
I was blown away. They receive a shipment of watches once a month and if they get a watch you are after you must get in there and buy straight away. 1 lady in the store tells me she came from Newcastle to buy a particular watch which she enquired about 2 days earlier and when she got there it was sold.

I wonder how bad things really are in this country or are we just a bunch of whiners. And one might think but this is the top end of town buying this sort of high end stuff. But I see plenty of middle class people wearing Rolex watches these days.

 

In a way, a very obvious statement, but a very important one!
I'd go further, that buying assets with loans on them should actually increase the value of your wealth.

Bring on QE or even hyperinflation, I say!

 

For me, the biggest advantage of property investment is leverage, which means you can accelerate the growth of your wealth by borrowing money. This benefit comes with another benefit which is reducing the true value of the debt with inflation. Let us assume that someone has a $1M debt this year, which is equivalent to 10 gold bars and the inflation rate is about 2.5% per year. After 4 years, the same $1M debt would be equivalent to only 9 gold bars.

 

The Rolex thing is a symptom of both ubiquity of luxury goods due desire created by social media, easy access to credit, and tourists but most importantly deliberately constrained supply ; Rolex doesn’t want to be selling stock on the AUD price list (which they do not revise regularly) when they can obtain 10-20% more in other markets.

 

Most of the people that buy status symbols do so due to their own feelings of inadequacy.

 

I'm looking at buying one of those Ford monster trucks and putting a chevy badge on it.

I'll then ask Macca's if they can raise the bar so I can get drive thru.

 

Ouch. I own a Rolex. And it hasn’t done much to help with my inadequacy. Not really much of a watch person but this thing is nice. It’s heavy and feels like a quality watch. And yes it’s a status symbol that reminds me of what I have achieved. I have worked hard and have done well and rewarded myself with a trophy of sorts.
And if people are impressed with my fancy watch then bonus. And if not than so what. I’m impressed with it and that’s all that matters.

 

That GST refund for tourists is also a factor, Australia is a big shopping destination for many Asian tourists. I would guess many luxury brands are doing very well in Australia.

While we are not seeing prices drop to reflect the lower costs of outsourcing I have no doubt it has been a factor in keeping the lid on inflation.

 

The thing is, inflation has been quite low in recent years and in the foreseeable future, so this benefit is not as good as in the past, although the flip side to low inflation is also low interest rates.