All Posts Tagged With: "Glenn Stevens"

–That smooching sound you hear is the sound of Australian investors planting a big fat kiss on the bald head of RBA Governor, Glenn Stevens. Stevens has no plans to raise interest rates anytime soon in Australia. He said as much in remarks yesterday. Despite a hell-storm brewing in Europe, Aussie stocks have opened the day up almost two per cent.

–What did the money-price fixer have to say?

There is an increasing amount of focus on the Australian residential property market. Last week, outgoing BHP Chairman Don Argus said: ‘I think the Australian Banking Sector has gone too far. You can look at some of them now as giant building societies.’ He was referring to the large exposure that the big four Australian banks have to residential property.

When the man who sets interest rates tells you that you’re rising, it would be wise to at least hear him out. Whether you take him at his word is up to you. But if you’re making financial plans – say, like you’re going to buy a house and are trying to figure out if you can stand a few extra points rise in the interest rate – the man has told you what is going to happen.

As the main rival (amongst paper currencies) to the dollar as a global reserve currency, the euro’s coming collapse has to, almost by definition, equal dollar strength. There just aren’t that many more liquid alternatives for large institutions and central banks.

That is clever to suggest that when rates rise people will have to find another way to say that houses are affordable. But we reckon when rates rise, as they eventually must, a lot of new home buyers will find out that access to cheap credit does not make a house affordable. It just makes the amount of debt you owe to the bank a lot larger.

We’ll see about that. Stocks are certainly pricing in a profit recovery (about which we have our doubts). But Mr. Stevens also had a bit to say about credit markets and balance sheets, in comments that were not as widely reported as his comments on Australian housing. More on housing in a second.

For now, at least for this week, it sure does look like the appetite for risk is back. The U.S. dollar and Japanese Yen are weak, while commodity currencies like the Australian, New Zealand, and Canadian dollars are up. Bond prices are down, stocks are trending up, and even oil is creeping back over $50, looking to make a breakout.