Another interest rate drop persective.

[rizzo]

Morning guys,

Please don't be to brutal on what I'm about to say, money isn't my strong point

Anyway, A lot of focus has been placed on people with debt, home loans etc. And they all welcome the interest rate drops. But what about the people who have no loans, and have spent their lives saving? The interest rate drop will cause just as much damage to them as it will to the people with loans.

A bloke at work said that if his rate goes down to 6% he will lose $160 a week, Thats a bloody big drop in income per week..

What are other peoples thoughts?

 

[Ghostwriter]

From what I can gather, interest rates will go back up again, in the next 12 - 18 months, and it could be big rises too, the piper still has to be paid, and by cutting rates, means the piper isn't getting paid, in the short term the best position to be in would be no debt, safe job, and no savings or shares, and house paid for, in the long term people with home loans over 3 times annual income are going to struggle, credit card debt will be a killer, and anyone with shaers and cash to buy shares will make a killing imo.

On cbnc last night they identified a lot of the sellers on thursday afternoon were mutual funds selling 401K's which is ppl bailing out of shares within their super funds, imo that is what the market was waiting for, total capitulation at the retail level, ie the idiots selling when they should've held, the brokers on the floor of the Dow called the bottom before the market opened.

I could be wrong on all this and time will tell, but the problem isn't in the sharemarket per se, its the credit markets, and that is getting fixed.
Its not all plain sailing from here on, but sometimes this stuff is like a cyclone you don't hear it coming, it leaves a mess, then its gone, I'm not saying its gone, but all I know is there is a mess to clean up.
My greed factor is slowly replacing my fear factor, i'm gonna stick my head up and see if it gets mown down.

 

[Pornstar]

You can hedge your risk to the markets in so many ways, eg. if interest rate drops/hikes will hurt you, buy/sell bond futures. If the value of the AUD is critical then hedge yourself with an FX position. If your shares are falling, sell a CFD (can't do that right now).

I have little sympathy for people who expose themselves to financial risk without making any effort to protect themselves from the downside.