wednesday wobbles, page-119

Genner

It should only matter in degree.

1. No rate cut and expectations are shattered and the market falls, at least till they think about it.

2. 25 basis pts and and the news is built in and the market falls.

3. 50 basis pts and a spike short term.

The history of rate cuts is that they follow a market down.

First rate cuts are market positive.

Second rate cuts are mildy market stimulative.

Subsequent rate cuts are worth nothing.

Interest rates rise in a booming ecoomy and fall in a recession so how any one can see a third rate cut as positive for markets is beyond me.

In OZ we are talking about a rate hike and that can be positive till we falter. Rates follow markets, not lead them.

Looking for a change in rate direction is a following indicator not a leading one.

I am not a fundamentalist but with record unemployment and capacity restraints we have all the hallmarks of wage explosion and subsequent inflation and we should expect record trade imbalances through constraints and farm disaster and adverse currency, but massive imports. They will try and tell you that that is normal in an investment boom as they have as long as I can remember, but it just gets bigger.

This must lead to higher local rates and a decline in individual available consumption.

OK, none of that fundamentalist claptrap means today, but markets look ahead.