Fed Hike In September Still A Good Bet

Markets interpreted the minutes from the July Federal Reserve meeting as reducing the risk of a September interest rate “lift off” – but to my mind that just seemed wishful thinking. I still think September is a good bet. Worryingly markets don’t yet seem to have priced in this risk – the sell-off in recent days appears to reflect concerns over China and oil prices.

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Bleak Data Confirms Lower Rates Ahead

The latest survey of business investment intentions from the Australian Bureau of Statistics made for very bleak reading. Not only is the non-mining sector not revising up their capital spending plans – as anticipated by the Reserve Bank of Australia – they have actually revised them down. Allowing for the differences between expected and actual investment outcomes over time, the latest survey suggests overall private business investment will fall by around 20% next financial year.

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Breaking Down The Budget

Federal Treasurer Joe Hockey’s claim that the Government’s latest budget provides a “credible path back to surplus” has been widely derided – as is usual. According to the Budget papers, the now yawning budget deficit of $35 billion expected for 2015-16 (2.1% of GDP) is then projected to gradually shrink over the next few years, such that by 2019-20 it should again be back in the black.

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Two Rules Of Thumb For Sector Investing

One of the benefits of using equity ETFs is that they enable investors to engage in broad market or sector investment strategies without having to decide which individual stocks to invest in. The question naturally arises: when should one sector be favoured over another? It turns out there are a two handy rules of thumb that might help investors with their deliberations.

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Leadership Failings Threaten Markets

We’re only a few weeks from the next Federal Budget and already the omens are not good. Due to the slump in commodity prices, and ongoing general weakness in the economy, we know that the Budget will contain another confidence jarring write down in government revenues. Prime Minister Tony Abbott this past week hinted the loss could be around $30 billion over the four year forward estimate period.

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Deflation Fears Over Inflated

With global equity markets continuing to rise, more and more investors are starting to fret that the party might be about to end sometime soon. As the saying goes, however, equity prices tend to climb a “wall of worry” – as long as there’s at least a vocal minority worrying about the market, chances are that prices will keep moving higher.

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Investors Need to Be Wary of Crowds

The trend is your friend in financial markets, but investors also need to be wary when a strong consensus emerges on the likely price direction in any one market. To my mind, bond yields and share prices now seem most vulnerable to a shift in currently consensus bullish sentiment, though this may well entrench the other consensus trade of selling the Australian dollar and gold.

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Why The RBA Is Wrong About House Prices

If we’re not careful the nervous nellies that continually worry about Australian house prices risk talking the economy into an even more serious downturn. In repeated public speeches in recent weeks, Reserve Bank officials have hinted that – along with ASIC – it is considering imposing credit lending controls for investors, especially in Sydney and Melbourne.

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Bassanese: Remain Bearish Gold

Gold prices had a long a glorious run during the commodity price upswing and then during the early stages of global economic recovery from the 2008 financial crisis. But along with the commodity prices and the Australian dollar more broadly, gold prices peaked around mid-2011, and it has largely been one-way traffic downward ever since.

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