banana republic: get out now
The recent CPI of 4% on an annual basis shows us the sharemarket will turn.
I note I was about the only poster on HC who predicted the May interest rate rise and correction.
Whilst I do not expect a big slump in August/september, the road ahead of that will be bad.
I expect trading in the 4700- 4900 range over the next two months..time for sensible people to get out and go to cash.
Heed my words and be saved.
Here is how the smh called yeterdays CPI news:
"SOARING petrol and banana prices have helped propel inflation to an 11-year high, squeezing family budgets and making another interest rate increase next week a near certainty.
The annual inflation rate has jumped to an uncomfortable 4 per cent, the highest since 1995 if the one-off price spike following the introduction of the GST is excluded. Prices rose 1.6 per cent in the June quarter alone.
The damage caused to north Queensland farms by Cyclone Larry sent the price of bananas up 250 per cent in the June quarter - which led to price rises for other fruit - while fuel rose 11.2 per cent in the quarter and nearly 25 per cent for the year.
The figures show price pressures in the economy are building.
Inflation is now a full percentage point above the Reserve Bank's target of between 2 per cent and 3 per cent and the bank's weighted median inflation rate, which allows for one-off price fluctuations, has risen to 3 per cent.
Economists said an interest rate rise next week to check inflation was almost certain.
"The case for a rate rise following the RBA August board meeting now looks complete," said the Commonwealth Bank chief economist, Michael Blythe.
Bond futures traded on financial markets have priced in a 100 per cent chance that the official rate will rise to 6 per cent from 5.75 per cent after the Reserve Bank's monthly meeting next Tuesday. There is also an 80 per cent chance of another rate rise before the end of the year.
Some analysts believe that for the first time in six years the bank may lift rates by half a percentage point instead of the normal quarter point.
Interest rates jitters caused the sharemarket's All Ordinaries Index to drop 52.3 points to 4907.6 and the dollar rose almost half a US cent on the expectation of higher interest rates.
As well as higher petrol and banana prices, the Bureau of Statistics' consumer price index showed significant increases for a range of household items.
Child care rose 12.4 per cent in the year to June and is up 82 per cent over the past decade. Food prices increased 8.3 per cent in the year, transport 7.7 per cent, education 5.8 per cent and health 4.6 per cent.
The Federal Government, which used the slogan "keeping interest rates low" in the last election campaign, played down the economic consequences of the inflation figures.
The Treasurer, Peter Costello, said the "temporary factors" affecting inflation were likely to abate. "Our unemployment rate remains low and looking through the one-off factors in this consumer price index, inflation remains moderate.
But the shadow treasurer, Wayne Swan, said the economy faced a serious inflation challenge. "With the ongoing threat of high petrol prices, Peter Costello has had the opportunity over the last few budgets to put in place policies to counteract inflationary pressure in the Australian economy," he said.
"Unfortunately his failure to address the skills crisis or infrastructure bottlenecks has now allowed these capacity constraints to push up underlying inflation."
The NSW Treasurer, Michael Costa, said Mr Costello's budget spending had put pressure on interest rates.
What average earners picked up on the tax cut swing they would lose on the interest rate roundabout, he said.
"Workers on average incomes of around $56,000 received a $10 weekly tax cut in the federal budget. If interest rates rise by 0.25 per cent, families with an average new mortgage in NSW will have to find an extra $60 in interest repayments each month."
