Monday May 11 - 5000 years, page-71

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Bruno81

2,422 Posts.

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11/05/20

17:28

Post #: 44556601
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Originally posted by minerva ↑

I'm just an ordinary joe (or fred - if joes' are unhappy with the reference), so don't take too much notice of my opinions.

When interest rates are described as "negative" what is being referred to is the inter-bank overnight settlement central bank interest rate. This rate is pretty irrelevant to real world interest rates. If the rate was negative it wouldn't mean that you and I could have someone pay us to borrow money from them. Real economy interest rates are much more influenced by the longer term bond market. This is where the RBA (and other central banks) have purchasing bonds (with printed money), thus forcing the price up and therefore the market interest rates down.

The RBA governor has indicated that he is not keen on negative interest rates, and even if he was and lowered the settlement rate to negative 0.25% and that actually flowed through to real world rates, the 10 year government bond (which is the cheapest money you can get) rate would still be positive (2% coupon).

The future behaviour of the market is something that is far too unpredictable for me to predict. I just sit and watch and if it seems to be going up I might buy some GEAR, or if down some BBOZ during short times during a day. I have been out catching coronavirus at the supermarket since my last post, otherwise I might have bought something. Of course the market will at some stage accept reality (whatever that might be), but I haven't sufficient money to bet against it. My opinion is that some months after we are all happily back at work the market might discover the meaning of the "n" in nCOVID-19 (where "we" is in particular referring to the US), and realises that we have only seen the first 1% of infections and are on the way to 80%).

I have to now go out to the vegetable garden to plant something so I can eat in 6 months time (just joking - too old for emoticons).

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Thanks for your reply, I'm still pretty young 38 and have really become interested in the markets and finance for the last few years which makes me ask a lot of questions in search of better understanding, more so because what we're heading into has never happened before with negative rates etc. I've been doing the same thing with bboz and gear also a bit of bbus as well although harder lately with smaller swings, done ok lately going long on some bigger stocks, I know it's hard to predict but I really think we'll go down again heavily probably soon. All the best with your investing.

XJO Value at posting: 5,461.2
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