TIME TO HEDGE YOUR BETS ?

TIME TO HEDGE YOUR BETS ?

Prime Minister John Howard said this week, “What is happening in the United States is a reminder that you cannot take economic prosperity for granted.” So true – his comment mirrors the exact sentiment when our economy floundered in the “recession we had to have”. Many have suggested this week that our mentality to money is in timely need of an uppercut, given our propensity to spend where a greater concern is that many are reliant on other people’s money. This was further evidenced earlier this week when the Reserve Bank took the extraordinary step of dismissing rumours that arrangements had been made to bail out Adelaide Bank with emergency funding. As global financial markets problems continue, last week we saw ANZ raise margin lending rates and this week the Commonwealth Bank followed suit. The international cost of other people’s money is climbing which is exactly why investors are hedging their bets where today, their greatest concern is the alarming lack of transparency.

Always a great daily read is www.crikey.com.au where one of their commentators Glenn Dyer wrote earlier this week, “ Excuse me for being cynical, but the US Fed’s 0.50% cut on the button overnight was nothing but a bail out of Wall Street urgers, dodgy London and European financiers and fat, complacent Australian banks.” Ouch !! To further prove his point Mr Dyer said, “To do nothing would have created an ever bigger black hole because, believe it or not, our central bankers are operating in an information vacuum. It’s not me saying that, our Reserve Bank Governor, Glenn Stevens, said it yesterday when he made this remark about the lack of accurate information on where the risks currently lie:

– At the moment, there is widespread suspicion in the absence of clear information. It would be very damaging for that lack of information to lead to a lengthy period of severely reduced credit flow to perfectly good borrowers simply because investors cannot tell who is sound and who is not. More information is needed.

Now we move to the interesting part given that hedge fund players have been driving our top end property markets in recent years. Hedge funds remain a bit of an unknown quantity, aside from the fact that they are exposed to international currencies and became popular at or about the same time as plasma screens, they punt the financial markets and have been well rewarded for delivering excellent investor returns. In turn they have then become the strongest players in top end real estate sales. As one banker told me this week, “they punt high and follow through – more importantly they put their own money where their mouth is.”

For obvious reasons the vast majority remain unclear on the exact positioning of our financial markets so we will have to rely on a need – to – know – basis (which equates to nothing) as it is apparent that even our Reserve Bank Head Teller faces this very same dilemma.

That being the case watch the stock market closely in coming weeks , given that the real estate markets shut down now with school holidays. When the markets return in mid-October should we see an oversupply of top –end properties which therein explains today’s ongoing international banking debate. One thing we do know is that they won’t be including their multiple plasma screens in the list of inclusions.

They love their footy and a punt on the gee gee’s – what remains to be seen is what will constitute a gee up !! Many share a belief that banking today – is simply not, as clear as day. Now we will watch with interest – although merchant bankers love to be watched. Maybe the Federal Government know more than they are saying CLICK HERE Cheers ^__^

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