Across talkback radio, editorial columns, twitter, and stock forums this week, market watchers have been a abuzz with their views on Reserve Bank of Australia assistant governor Guy Debelle's warning that financial markets could be headed for a "violent" adjustment.
The bulls have lambasted him for being alarmist while the bears have applauded his frankness.
"If that speech was supposed to be Debelle's audition for the top job at the RBA he really blew it," Armytage Private Capital chairman Lee laFraté said.
"Central bankers are in a critical role and need to much more circumspect and cautious in their commentary," he added. Advertisement
Dr Debelle began his address to the Citi investment conference in Sydney on Tuesday by stating that: "Financial markets have been quiet, maybe too quiet, for much of this year".
In the speech on volatility and market pricing he went on to compare current conditions to those before the 1994 bond crash and warn; "The sell-off, particularly in fixed income, could be relatively violent when it comes".
Mr laFraté said he was critical of Dr Debelle's speech not only because it used language that was inflammatory by central bank standards, but also because he believes it overstated the risks currently facing investors.
"It is simply irresponsible for senior member of the RBA to be talking up doom and gloom," Mr laFraté said.
But Ardea Investment Management principal and portfolio manager Tamar Hamlyn applauded the assistant governor for taking a strong stance.
"The flash crash in United States bond markets the following night is pretty convincing evidence that Dr Debelle was spot on," Mr Hamlyn said.
"It would be irresponsible for the RBA to continue to shy away from highlighting the very concerning issues happening in financial markets at the moment," Mr Hamlyn said.
He compared Dr Debelle's highlighting of the risks in financial markets to his boss, RBA governor Glenn Stevens' recent attempts to draw attention to the risk of the property market overheating. Mr Stevens has repeatedly warned that "house prices can not continue to go up forever".
If you actually listen to what he said, rather than what the chattering classes are saying he said, Debelle was absolutely right. US fixed income is unreasonably rich, and when it corrects it may well correct quite violently.
Not sure what the reporter means by "bulls" and "bears" though. Bulls and bears in what markets? The reporter has no clue.
The truth will set you free. But first, it will piss you off. --Gloria Steinem AREPS™
If you actually listen to what he said, rather than what the chattering classes are saying he said, Debelle was absolutely right. US fixed income is unreasonably rich, and when it corrects it may well correct quite violently.
Not sure what the reporter means by "bulls" and "bears" though. Bulls and bears in what markets? The reporter has no clue.
All too late, too little. The Transmutation is here.
So much exaggeration about the bull /bear labeling..all designed to provide sensationalist journo write up.
The apocaholics can say whatever,,, The question a serious investor should ask themselves, is :will rents cover yor expenditure.. & if not now when..? The bears can argue that you're behind (initially) but at what point do you predict inflation & renal growth will push one out of debt*?
The RBA view increases in housing construction as advantagous realistically, it involves the specific markets of including developers selling blocks govts collecting in taxes, builders constructing homes & providing employment ( govts still collects taxes) it all goes together..
The RBA is caught between a rock & hard place , it does aim to cuts rates to assist the housing market.
Newjerk? can you try harder than dig up another person's blog. My first promo was with Billabong and my name in English is modified with a T, am Perth born but also lived in Sydney to make my $$ It's Absolutely Fabulous if it includes brilliant locations, & high calibre tenants..what more does one want? Understand the power of the two "P"" or be financially challenged Even better when there is family who are property mad and one is born in some entitlements.....Understand that beautiful women are the exhibitionists we crave attention, whilst hot blooded men are the voyeurs ... A stunning woman can command and takes pleasure in being noticed. Seems not too many understand what it means to hold and own props and get threatened by those who do. Banks are considered to be law abiding and & rather boring places yeah not true . A bank balance sheet will show capital is dwarfed by their liabilities this means when a portions of loans is falling its problems for the bank.
Being what most would call a 'bear' I haven't applauded anything the RBA have done because in essence they haven't done anything at all. Actions speak louder than words and as it stands the RBA have given nothing but deafening silence.
The bullshite rhetoric of warnings and other ferfies were there to let investors know they need to take a break. If they didn't I can assure you the RBA would have done sweet FA.
What it does show that investors are nothing but sheeple speculators, the RBA give a vague warning on the issue and they all shit themselves. A true investor would ignore these warnings if they were fully aware of the game and the rmes and safe in the knowledge that the market they have entered is stable along with their decision to buy.
They wouldn't pay attention because they wouldn't need to, the fact remains they have shat their panties because they have no fucking idea about the market, they have the sole mindset of 'houses mate, they always go up' and that's it. Having a negative msg from the RBA just makes them realise how dangerous the whole thing is, they shit themselves and the market cools off.
If the Bulls on here were right about fundamentals and the majority were as knowledgable then this market should have plenty of growth left on it under these market conditions, with or without the RBA rhetoric.
Between January and September 1994, the U.S. 30-year long bond’s yield jumped more than 150 basis points to 7.75%. The proximate trigger was a Federal Reserve rate hike as it started to tighten policy following recovery from the 1991 recession.
Ha! Call that a bond crash? That's peanuts compared to the Aug 1979 case, which was followed up by the 30 y Tbond going to 15% pa.
At some point high interest rates and common price inflation will catch up with the bout of deflation that began in 2006. Then watch all those imaginary gains in property go down the plug hole!
Even though gold is no longer cheap it will prove a better hold than Aus property until the end of the decade.
The next trick of our glorious banks will be to charge us a fee for using net bank!!! You are no longer customer, you are property!!!
BP, you are going to be popped like a warm bottle of champagne.
If it goes to shit Golly he certainly will.
The transmutation may be the banks owning all the IP and then the government buying (aka bailout) the banks and owning everything (except anything of value like resources, infrastructure, utilities etc), you know, transmutation.
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