that was an interesting article flemster, although I have got thoughts and experiences to add to that.
yup, costs of finance goes down profits increase. certainly in the real estate development area things begin to boom. likewise low interest rates are very good for property trusts that have a percentage of their assets leveraged. my Australian education unit AEU (childcare) is able to pay 8% pa. on my buy in price, and the stock has been more recently making modest gains.
likewise with the banks early last year, after there had been a number of interest rate cuts by the RBA why would anyone want to accept 3.75% interest in a bank account when you could receive double that holding shares in the same bank(assuming franking credits)... I was going extremely well holding a lot of bank shares in the first half of last year - then taper talk started and they dropped way back again. (not cfds then)
I think warren buffet has a rule about the pe or is it the return on equity - as to what it should be in relation to the overnight bank rate.
so when talking pe's etc. we should be talking in relation to the RBA o/n bank rate rather than a fixed figure. IMO. I have got a lot of money in AEU so when interest rates look like going up I am going to have to be very nimble.
