What's your prediction on the Australian Dollar?

[amaroo]

I know many are hoping for a lower dollar because it will help business (make more profit). But what about the consumer. Petrol prices will go through the roof. Imports will increase substantially. Worth it? I have my doubts. Many families are already struggling, to increase fuel by 30% could be a big problem.

Profitable businesses = more jobs ... no brainer IMHO.

The country needs businesses making money and heaps of it ... can you imagine the pitiful lifestyle if everyone worked for the government or sucked exclusively from the welfare TIT.

 

[cove]

When home loan interest rates eventually move up to 6 or 7 per cent there could be quite a few mortgagee sales but the Aussie dollar will not have directly caused this to happen.
We did get 0.9385 today so that may cause it to go higher to make us feel like idiots for buying.

 

[JohnK]

My first loan was 17%. But even better the term deposit rates were 15%. The AUD-> USD was ~0.80-0.85.

I miss those days. And no I didn't care about the home loan rates because when I started saving my savings grew quickly. Oh well.

 

[nickfromeastryde]

Profitable businesses = more jobs ... no brainer IMHO.

The country needs businesses making money and heaps of it ... can you imagine the pitiful lifestyle if everyone worked for the government or sucked exclusively from the welfare TIT.

Aren't they one and same thing

 

[amaroo]

My first loan was 17%. But even better the term deposit rates were 15%. The AUD-> USD was ~0.80-0.85.

I miss those days. And no I didn't care about the home loan rates because when I started saving my savings grew quickly. Oh well.

The young ones have no idea what that feels like! Only a matter of time before rates increase.

 

[amaroo]

Aren't they one and same thing

Correct!

.......

 

[Awesom Andy]

The young ones have no idea what that feels like! Only a matter of time before rates increase.

They would if they have a credit card debt (which quite a few do). To soften the blow, I guess we can just tell them that the interest is around 0.055% per day.

 

[amaroo]

They would if they have a credit card debt (which quite a few do). To soften the blow, I guess we can just tell them that the interest is around 0.055% per day.

Doubt many have a CC debt in the hundreds of thousands.

 

[whatmeworry]

I know many are hoping for a lower dollar because it will help business (make more profit). But what about the consumer. Petrol prices will go through the roof. Imports will increase substantially. Worth it? I have my doubts. Many families are already struggling, to increase fuel by 30% could be a big problem.

I was reading something about residents in the UK finding it hard with the devaluation of the pound.

On the flip side it will be good for exporters, just a pity most of our manufacturing has been abandoned by both sides of politics.

 

[drsmithy]

My first loan was 17%. But even better the term deposit rates were 15%. The AUD-> USD was ~0.80-0.85.

I miss those days. And no I didn't care about the home loan rates because when I started saving my savings grew quickly. Oh well.

That's mainly because your mortgage was only about 1/3 as much in real terms as it would be today.

 

[blackcat20]

The young ones have no idea what that feels like! Only a matter of time before rates increase.

Mostly because we can't actually afford to buy a property....

Not keen on a lower dollar; means the wholesale price of my product goes up so I actually make less money.

 

[amaroo]

Mostly because we can't actually afford to buy a property....

Not keen on a lower dollar; means the wholesale price of my product goes up so I actually make less money.

FWIW I wouldn't buy into the current housing market for all the tea in China.

Yesterday we put a couple of our investment properties on the market ... time to cash-in and park it into something with better returns. Will be on the sideline watching with interest!

 

[Cossie]

With a trip to the old dart coming up and wanting to bring back some expensive car parts that are unavailable here, I hope it keeps rising.

I bought some US$ several years ago when it was in the high eighties and thought I did well.... ho hum.

As for any foreign exchange, just watch what I do, then do the opposite.

Same with property, my sister and I are putting one of our inherited properties on the market soon,

I dare say in 6 months time I'll be saying "why on earth did we do that!"

 

[FrankC]

With a trip to the old dart coming up and wanting to bring back some expensive car parts that are unavailable here, I hope it keeps rising.

I bought some US$ several years ago when it was in the high eighties and thought I did well.... ho hum.

As for any foreign exchange, just watch what I do, then do the opposite.

Same with property, my sister and I are putting one of our inherited properties on the market soon,

I dare say in 6 months time I'll be saying "why on earth did we do that!"

You are not alone
Maybe we should start a new thread, and document our transactions to warn others
Who knows we have such power on the market

 

[Foreigner]

Will be on the sideline watching with interest!

pun?

Would you park money in TDs in short term?

 

[amaroo]

pun?

Would you park money in TDs in short term?

It was a pun. Although even with TD at rock bottom rates they are probably producing the same or better return V residential income .... (excluding the equity windfall due to the bubbling market).

* this is not financial advice - I have no idea what the future holds for the housing market. The market is just as likely to continue making millionaires for many years to come

 

[RAM]

Profitable businesses = more jobs ... no brainer IMHO.

The country needs businesses making money and heaps of it ... can you imagine the pitiful lifestyle if everyone worked for the government or sucked exclusively from the welfare TIT.

Back in the 60s = correct answer
In the 70s = mostly correct
In the 80s (post float) - not so true
In the 90s - wrong (remember the J-curve?)
Post 2000 - BAD news if AUD moves more than +/- 3 cents any direction.

Econ 101 - In Australia roughly 65-70% of business (activity) is from the consumer. So 30-35% from business et al.

With collapse of Australian manufacturing (since 2001) for every extra $1 spent by consumers on a product approx 80 cents of it is produced offshore.

Thanks to the tax management what used to be safe was 70-85% of the extra dollar spent on services (cannot hold in your hand = rough defn). Thanks to Google, now ALL Aust online betting companies with mkt share >4%, Microsoft etc it is less than half.

"But a falling dollar is good for exporters...."

Not for long: The AUD is a pretty good barometer for world growth. Pre 2002 if expected OECD growth was 2.75% or more you owned the AUD, if it was revised higher - you shorted USD or JPY.

Post 2002 and the growth of China the rule of thumb changed and is now China dominated but OECD stills gets a guernsey (on the bench though).

So a falling AUD (other than some spike on something like an exotic FX option play) normally means the outlook for world growth is being cut.

So the outlook for commodity prices does not look good - so they fall. Often commodity prices fall by more than the AUD BUT the FX market is more liquid so you short the AUD against the Yen (lowest interest rate historically but now thank-you SFR) instead as a hedge against your production (regardless of where in the world you are based).

So Aust gets a forecast Balance of Payments disaster again and interest rates do not stand in the way of the rush for the door. Have a look at the fear of a slowdown in 2008. 30.6.08 AUD/USD = 0.9564 then by Nov 2008 0.6580, fear of China slowdown gone by Nov 2009 AUD/USD 0.9076. A manufacturer in Aust trying to get their raw materials etc from overseas and did not hedge - went broke.

But the experts were calling for AUD/USD 1.1000 in Jun Qtr 2008.

Also the flip side is our banks (and others) have borrowed vast amounts in other currencies. A good chunk is swapped back into AUD but an equally good chunk is not.

Best position for businesses = relatively stable AUD.
Best position for RBA = medium term volatile AUD (that's when they make billions in profits and pay huge divs to the Fed Gov)
Worst position for RBA - slow rising AUD (causes big unrealised losses on their FX holdings they gain as they 'smooth' the rise of the AUD by selling it and buying foreign currency).

 

[RAM]

With a trip to the old dart coming up and wanting to bring back some expensive car parts that are unavailable here, I hope it keeps rising.

I bought some US$ several years ago when it was in the high eighties and thought I did well.... ho hum.

As for any foreign exchange, just watch what I do, then do the opposite.

Same with property, my sister and I are putting one of our inherited properties on the market soon,

I dare say in 6 months time I'll be saying "why on earth did we do that!"

Put it in perspective - the GBP is much cheaper than for most of the last 25 years.

Virtually nobody picks the best time to transact.

Is the price today of the parts in AUD terms a good price? Can you pick the top/bottom of the market?

Too much greed can be upsetting.

A contemporary or mine (1 yr ahead at Uni) tried to time the markets in a HUGE way. Started work in 1985 and borrowed to the max. Worths low millions within a year (when I started work) and borrowed more. Worth > $10m (net of debt) in late Sept 1987. Put a non-refundable cash deposit on the latest Ferrari for delivery in 1988. Just $200,000 (the deposit that is).

October 20, 1987 - not so happy but still smart. Sold everything by lunchtime and before margin calls came in. He (from the spreadsheet he showed me at lunch) was now worth a little over $11,000 if he paid off all the debt by the following week (allowing for settlement delay on sold shares, accumulated interest on debt etc). He was not able to sell a single share in about 5 of his bets.

Plus he had his non-refundable deposit.

He tried to sell it for 4 months. Initially for 50c on the dollar and finally for 1c on the dollar. Never found a buyer.

He ran his spreadsheet through to Dec 31. He would have owed over $2mn by Oct 31, $3mn by late Nov and just under $4m as at 31 Dec. Some of his more speccy bets had still not traded since the crash. He had to reach an agreement with the ATO about not paying his tax in advance as required based on the previous year's non-wage earnings. At least he had donated a huge amount to the ATO in 85 and 86. He did not pay tax again on investments until the early 2000s.

That can happen when you keep rolling the dice.

So if it was me, I'd buy at least half of the parts now to pick up in 2015. But I'm a coward.

(PS: I bought all my Euro for 2015 last night at 0.7239 - I'm not greedy).

 

[JohnK]

I bought some US$ several years ago when it was in the high eighties and thought I did well.... ho hum.

I have buying up small amounts of USD every couple of weeks at ~0.90-0.92. One USD50 note costs ~AUD55. I won't be missing the money. I cant spend the USD here. And if the AUD drops I am prepared. Wish I had bought when it was ~1.05 but I stuffed that one up.

 

[Cossie]

I must admit I don't like risk and the only gambling I ever do is lotto, which I know is probably the worst option in trying to get a return. When I was made redundant in 2000, April fools day appropriately, the organisation I worked for paid for us to talk to a financial advisor.

He wanted me to 'margin lend' against our house and borrow to the max! I'm so glad I just stuck it in a fixed term and rolled over the superanuation. A former work colleague took his super, hit the share market fiercely and will now be working till he is probably 90, ok so that is a bit far fetched. He is a gambler, loves the horses and dogs and whatever he can bet on.