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)

Realated Share Investor reading

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c Share Investor 2008

Its only a Billion after all

News earlier this week that Labour kept secret the billion dollar hole that ACC has dug for itself should be no shock to the voting population.

The outgoing Labour government left behind a $1 billion hole in the ACC budget which will have to be filled, Prime Minister John Key said today.

Briefings from ACC officials said the corporation was seeking $297 million more for the current 2007/2008 year and similar figures for coming years  NZ Herald

They lied, cheated and manipulated their way through this election year hoping nobody would see through it so why would a measly 1 billion bucks down the toilet be any different?

A billion dollar hole wrought by a wasteful government department who hounds business without care or due diligence and has an attitude to taxpayer money that allows them to spend it on beauty care for employees pets is a department way out of control. The billion dollar hole proves that.

For Labour to try to avert attention away from their failure by saying National are crying wolf merely to put ACC up for sale is more of the same failed policy,misdirection and conspiracy theory finger pointing that left them losing big time on November the 8.

This sort of banal nonsense may have some traction when you are in Government but when you are in opposition it just looks like the ramblings of a bitter disorganised bunch of lefties ready for the knackers yard.

Just to show the party has learnt nothing from their election day loss David Parker, spokes weasel for ACC said this today:

"we left this incoming Government with a fantastic set of books... the billion dollars is only 5% of ACCs operating budget..."  Radiolive 6-9.00am

What planet is Parker living on and does he know he is opposition now?

Arrogant and ignorant to the end.

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c Political Animal 2008

Never mind the length, look at the volume

If you are one of those nervous nellies you probably shouldn't be reading this blog because I haven't lost interest in the stockmarket as some have in the NZX.

In fact I am more interested than when the market was going up over the last 5 years-it is more exciting when there are bargains to be had!

Most of the big overseas investors have retrenched and sold while the NZ dollar was higher and most Mum and Dad investors seem to have sat on their shares and the NZX is now operating on a mere trickle of volume where wild swings and achy hearts are the order of the day.

We only have die-hards like myself making the odd trade and during some days in November there were as few as 2000 trades .

We all know that the New Zealand Stockmarket operates on small volumes by comparison to overseas markets, but the very low volumes traded over the last month or so are an indicator that those that are left in the market want to stay and conversely those that have left are not ready to take what they see as risk and get back into a market they presumably think has further to fall.

They are probably right.

Watch though when things in the economy start to improve and news media releases are of a more positive nature the volume of shares traded will begin trending up and that is when a sustained improvement in the market is likely.

Until then the current trickle of trades on the NZX is largely a lack of interest rather than any sort of market meltdown, as is the case with the current high volumes traded on the NYSE .

Keep a look out for any significant and sustained volume increases for a more meaningful indication of the mood of the market.

Positive, and indeed, negative.


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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