AUDIO: Two Essential Investor Interviews

I have included two crucial interviews carried out by Kathryn Ryan from Radio New Zealand made over the last two days.

The first is an interview with Mark Binns, infrastructure CEO of Fletcher Building Ltd [FBU.NZX] where he talks about his company's role in rebuilding Christchurch and the obvious benefits that will bring to the company over the next 3-5 years.

The second interview is with Allan Bollard, Reserve Bank Governor, and his rationale for increasing the OCR today by 50 basis points to 2.5%.

The last interview is especially interesting given that Bollard made a preemptive rate cut today rather than the typical reactive moves that he usually makes, so it is clear that he sees the economy getting worse over 2011, partly due to the Christchurch Earthquake and that things will not pick up until 2012 when we will see increasing economic activity surrounding , ironically, around the rebuilding of Christchurch.

Fletcher Building will be one of the largest benefactors of this rebuilding so it makes the interview compelling listening to those investors thinking of buying FBU shares.

Download Interviews

Mark Binns
Allan Bollard


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c Share Investor 2011

Mr Conservative

Alan Bollard is inherently conservative and has only ever acted re-actively in his position as Reserve Bank Governor.

The current economic climate, unlike the weather, is melting down and this should lay heavy on his mind.

One might say that he saw all this turmoil coming and left himself alot of room to move interest rate downwards when really needed but I do not credit him with that much foresight-hey he works in a government department how talented can he be?

Like tax cuts, lower interest rates stimulate economic activity, simply because they leave more money in consumers pockets and even though inflation is supposed to be his only target wee Alan should have been cognisant of a failing economy for some time.

Economic pundits have dangled cuts of anything between 1-2% and I myself would contend that 2% would be the more appropriate figure, in fact I have argued for a year that he needed to move downwards.

Given Bollards track record of blind conservatism though it would be a surprise to the market if he picked a rate close to 2%.

I dont buy lotto tickets (I only in markets!) but I am going to stick my neck out and pick a 1.25% cut at 9.00am this morning (NZ Time)

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c Share Investor 2008

OCR cut puts pressure on investors seeking better returns

The OCR rate cut coming this Thursday varies from 1-1.5% depending on which financial media commentator you are following but what is clear is that this cut isn't going to immediately stimulate any sector of the economy because most people have put their wallet away thinking there are cheaper bargains to be had.

What it will do is put pressure on many who have money to invest to go out and find a better return than the gross 6% (and dropping) interest rate they maybe getting for a term investment and the meager real returns still to be found in residential real estate for rentals-values for that sector still have a long way to fall and then will become more attractive return-wise.

I would contend that there are many good stocks on New Zealand's NZX that will find an attractive home for the vast amount of billions currently tied up in term investments in our three major banks.

With a 1.5% point cut on December 4 the OCR rate would be 5% and another likely cut early in 2009 would see our OCR fall below 5% putting pressure on investors coming back from holiday to go hunting for better returns in the stockmarket.

Look for higher yielding and safer large capital stocks to benefit from rate cuts.

A dozen or more Kiwi stocks are paying more than a 10% gross yield and companies like Telecom NZ [TEL.NZ] should do well from those bailing out of banks.

Eventually the rate cuts will work to stimulate our economy, just as tax cuts do.

I am hoping against hope that since the previous Government has guaranteed finance companies that no more term deposit money goes after their higher rates.



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c Share Investor 2008

Bollard sits on his hands

Alan Bollard rattled his sabre again last week.

Keeping the cash rate at 8.25% while telling us inflation was a risk down the road.

Well helloooo! could one of the reasons to the risk of inflation be your 4 rate hikes this year and multiple ones over the last few years?

The short answer is yes but the less interesting answer is that Bollard is clearly out of his depth.

Barely able to see over the rims of his accountant style glasses, he rarely has the vision to see further than what happens from day to day..

Instead of dropping the cash rate, as he should have, he risks putting the New Zealand economy at the sort of risk the Labour Government has put it under for the last 8 stifling years.

Labour did it with world record breaking high taxes, removing cash and investment from the economy and Bollard did it with the worlds highest interest rates outside the worlds other banana republics, ditto removing cash from street level and strangling productive investment, savings and business.

World economies are cutting rates to stimulate economies and Bollard sits on his hands. It looks like he will only move once the economic cycle we are in is in the middle of a meltdown.


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c Share Investor 2007