Black Monday

[bull....]

Covid-hit Japan now paying banks to lend

https://asiatimes.com/2020/08/covid-...banks-to-lend/

[bull....]

carrying on the talk about utilities in NZ being in demand at the moment heres some data to back it up

NZX index from 21/7/2020 is up roughly 1.51% as of friday
NZX Utilities index is up 7.21% in the same time frame
the NZ 10 yr bonds have fallen 23.45% in the same time frame from .81 to .62%

All of this started around the last RBNZ meeting and the announcement of increase in QE to 100 billion .
Now you can clearly see bonds have been the best place to make money in the time frame and likely going forward ( as ORR wants lower rates) but also that because of the QE soaking up the available bonds money needs to find a home , so is flowing into bond proxies like gentailers etc (utilities) as they provide the next best thing to stable returns.
these trends probably likely to continue my assumption as RBNZ has only made a commitment to march next year not to go negative so people will likely front run the expectation of dramatically lower rates next next year , effects of this are lower mortgage rates and much lower term deposits and my assumption of any stock with stable dividends being in demand.

[Bjauck]

Biggest NZ bank predicts negative interest rates



Most of New Zealand’s bank economists now expect that the official cash rate will slip below zero in April next year.

https://www.stuff.co.nz/business/mon...interest-rates

get your income why you can

...or capital gaIns?

Bank deposits, already returning below the inflation rate, have a further tax cut taken from their already below inflation returns.

[bull....]

As banks take their cues from the RBNZ, the main banks push harder to lower the cost of interest paid to customers in a taste of what is to come

https://www.interest.co.nz/news/1066...paid-customers


Separately, the RBNZ announced that it would increase its bond buying for this week. The RBNZ will buy $1.35b of government bonds this week, up from $1.09b last week and $940m the week before. Unlike earlier this year, the RBNZ has chosen not to skew purchases towards the long-end of the curve. The decision to increase purchases two weeks in a row is a clear signal that Bank staff, under the MPC’s broad directive, will try to use bond buying to push local rates lower in advance of a likely OCR cut to negative next year.

https://www.interest.co.nz/currencie...-lower-powells

[Snoopy]

Simplicity Offers Record Low 2.25% Mortgage, And Predicts Rates Will Go Lower

https://www.scoop.co.nz/stories/BU20...l-go-lower.htm

there's sustained buying in the dividend stocks, but not too late .... "get your income while you can" term deposits are going lower

"Invest in haste and it could all go to waste." William 'Tubby' Shakesphere (no relation)

I have to admit to being an admirer of Sam Stubb's "Simplicity" and his stated intent to drive down industry management fees. But I wonder if this move into mortgages is a step too far? I heard a radio interview with Stubbs in which he stated that he intended to fund this mortgage lending from kiwisaver funds. Instead of putting kiwisavers money into the bank at a 1% interest rate or less, Stubbs would put it into a mortgage fund where investors get double a bank interest rate return, and house buyers get a below bank market mortgage rate - a win win. Stubbs also said that first home buyers constituted the lowest mortgage market risk, That last statement certainly raised my eyebrows. Wouldn't a mid-career person with a much lower mortgage, with half of it already paid down, be a lower risk than a first time buyer? I do wonder what risk management strategy Stubbs might have in place.

If professional players can have their judgement affected in this low interest rate environments, what does that say for the rest of us? Those who rushed to buy Contact Energy at $9 to secure an income stream, could now spend more than a decade trying to bank their income just to get back to the start point where their capital losses are recovered. A great utility can still be overpriced and make a terrible investment because of that. Fear of Missing Out (FOMO) will in general lead to poor investment decisions, as people overpay for what they think is a 'safe income paying investment'. Unforeseen crises will see to it that the thinking investor will not be too late to grab investment opportunities, even if they have to exercise some patience. Earning 1% on a bank term deposit or less might be a bitter pill to swallow. But it beats losing 20% of your capital on an investment that has not been thought through. My message to investors at this time is 'Be patient' and 'Be careful'. With FOMO we may be entering a period of investor foolishness, where experienced investors can sell certain utility investments at overinflated prices to the FOMO crowd. Cashing up on the madness (or putting it in the can investment parlance slang) may prove to be the way to and prevent you becoming a penny constrained old fool.

Bull says "Get your income while you can!" I would caution that a better investment slogan for our times might be: "Can your income investment, before you become a git"

SNOOPY

[stoploss]

"Invest in haste and it could all go to waste." William 'Tubby' Shakesphere (no relation)

I have to admit to being an admirer of Sam Stubb's "Simplicity" and his stated intent to drive down industry management fees. But I wonder if this move into mortgages is a step too far? I heard a radio interview with Stubbs in which he stated that he intended to fund this mortgage lending from kiwisaver funds. Instead of putting kiwisavers money into the bank at a 1% interest rate or less, Stubbs would put it into a mortgage fund where investors get double a bank interest rate return, and house buyers get a below bank market mortgage rate - a win win. Stubbs also said that first home buyers constituted the lowest mortgage market risk, That last statement certainly raised my eyebrows. Wouldn't a mid-career person with a much lower mortgage, with half of it already paid down, be a lower risk than a first time buyer? I do wonder what risk management strategy Stubbs might have in place.

If professional players can have their judgement affected in this low interest rate environments, what does that say for the rest of us? Those who rushed to buy Contact Energy at $9 to secure an income stream, could now spend more than a decade trying to bank their income just to get back to the start point where their capital losses are recovered. A great utility can still be overpriced and make a terrible investment because of that. Fear of Missing Out (FOMO) will in general lead to poor investment decisions, as people overpay for what they think is a 'safe income paying investment'. Unforeseen crises will see to it that the thinking investor will not be too late to grab investment opportunities, even if they have to exercise some patience. Earning 1% on a bank term deposit or less might be a bitter pill to swallow. But it beats losing 20% of your capital on an investment that has not been thought through. My message to investors at this time is 'Be patient' and 'Be careful'. With FOMO we may be entering a period of investor foolishness, where experienced investors can sell certain utility investments at overinflated prices to the FOMO crowd. Cashing up on the madness (or putting it in the can investment parlance slang) may prove to be the way to and prevent you becoming a penny constrained old fool.

Bull says "Get your income while you can!" I would caution that a better investment slogan for our times might be: "Can your income investment, before you become a git"

SNOOPY

Snoopy I think his biggest problem is he is lending obviously a % or portion of his total Kiwisaver fund. What if the performance is average or the company for whatever reason gets into trouble and 20 % of his Kiwisaver customers just switch funds which would take them less than 5 minutes to do ... Does he call in the mortgages to balance the fund ?

[bull....]

your behind the curve snoopy its all about fomo and momo now fundamentals are out of vogue or irrelevant mostly in this environment of mass money printing.
why your cen example is correct it really ran far ahead of all other gentailers at the time which can happen when people single out a stock i mean look at tesla as an example.

another gentailer MCY which is considered the best stock in the group at the moment capital lost from the hig of 5.50 for only 1 year is 7% ( if your held longer than 1 year then your % gain is positive not as snoopy 1 point in time example) on todays prices but if you add in dividends received over the year its more likely 2% down and next year could easliy be back in positive so your statements are misleading. ( only a small % of people brought at the very highs as well)
gentailers the right ones held for income are most likely to provide good or much better returns than term deposits going forward.

[Snoopy]

Snoopy I think his biggest problem is he is lending obviously a % or portion of his total Kiwisaver fund. What if the performance is average or the company for whatever reason gets into trouble and 20 % of his Kiwisaver customers just switch funds which would take them less than 5 minutes to do ... Does he call in the mortgages to balance the fund ?

Recent history would suggest running a low overhead structure and simply putting kiwisaver equity funds with index managers should see above average returns over time. Putting fixed interest money into mortgages rather than bond funds with interest rates at all time lows, I would suggest should be a strategy that will outperform the 'fixed interest market'. If Simplicity gets above market returns, then the chances of mass switching by kiwisaver holders is reduced. However, as we know humans are fickle and can be irrational in times of stress. So even though I think it is unlikely that Stubb's strategy will backfire, that doesn't mean it can't happen.

Stoploss, you pose the question that if there is a sudden withdrawal of fixed interest funds, does Stubbs call in the mortgages? You ask it as though Stubbs has discretion in what he might do. But I would say Stubbs would not have a choice in those circumstances. Perhaps selling the mortgages to another market player like a bank would be his last ditch get out of jail free card?

SNOOPY

[macduffy]

Stoploss, you pose the question that if there is a sudden withdrawal of fixed interest funds, does Stubbs call in the mortgages? You ask it as though Stubbs has discretion in what he might do. But I would say Stubbs would not have a choice in those circumstances. Perhaps selling the mortgages to another market player like a bank would be his last ditch get out of jail free card?

Yes, provided the market for mortgages is sufficiently strong at the time and that the price is "acceptable".

[Snoopy]

You're behind the curve snoopy its all about fomo and momo now fundamentals are out of vogue or irrelevant mostly in this environment of mass money printing.
why your cen example is correct it really ran far ahead of all other gentailers at the time which can happen when people single out a stock i mean look at tesla as an example.

Ah a new market paradigm! 'It is different this time.' Those of us who have been around the market for a while have heard this before, more than once. I can see myself owning a Tesla vehicle in the future, but the chances of me owning Tesla shares? Get back to me when positive cashflow is on the horizon.

another gentailer MCY which is considered the best stock in the group at the moment capital lost from the high of 5.50 for only 1 year is 7% ( if your held longer than 1 year then your % gain is positive not as snoopy 1 point in time example) on today's prices but if you add in dividends received over the year its more likely 2% down and next year could easily be back in positive so your statements are misleading (only a small % of people brought at the very highs as well) gentailers the right ones held for income are most likely to provide good or much better returns than term deposits going forward.

It is the small percentage of shareholders that bought MCY shares at $5.50 I am concerned about. I am not suggesting that buying CEN and MCY is a bad thing overall. Indeed I have a good chunk of my savings in each myself. But the time to buy in was when I did, when the market was scared the Greens would force the gentailers to sell their electricity to the market at historical generation cost, and when Origin in Australia were quitting their CEN stake which depressed the price. Not today. Drought years usually fuel short term fears in the electricity market. That would be my signal to start looking again at MCY and CEN. Falling interest rates are expected and already built into the gentailers prices in my view. The market always looks ahead and will have already priced in future interest rate cuts.

Nothing wrong with having gentailers in your investment portfolio. But not a any price.

SNOOPY