What's your prediction on the Australian Dollar?

[Doctore1003]

The odds are very high that the US Fed will raise rates but that's probably already been priced into the markets. The more important question is, how aggressive will the pace of upcoming rises be.

 

[Jeffrey O'Neill]

So we have the bond markets pricing in a 50% chance of a rate rise in 2016 1st qtr. ain't going to happen.

The terms of trade is only half way to reverting back to mean, and we can be sure there will be a an overshoot on the way down.

resource company debt is turning into the new junk bond threat to the global economy, along with auto debt in the USA approaching $1T

national disposable income fell another 0.8% in the sept qtr to be back to 2010 levels. GNE and DFD are also continuing their fall since mid 2011.

There's not much propping up the AUD at the moment and I'm expecting when the straw breaks the camels back it will be an elevator ride down to the lows 60s sometime next year and 45-50c by the bottom. Once the housing bubble pops it's going to be a real mess.

Rental growth Oz wide is heading towards 0%, so the spending boost from housing consturction is going to fall off soon. WA has sky high construction with pop growth fast approaching negative. Mining CAPEX is still nearly 4 times the 2000 level which was roughly the historical average.

Still plenty of income shock left as iron ore heads to below $30 and coal falling along with it. The LNG saviour is facing broken contracts as spot prices seriously undercuts contracts linked to oil prices. Profitless headline GDP growth is the order of the day.

I've taken the current spike in AUD to buy some more USD ETFs. Will hopefully help fund my holidays over the next couple of years.

 

[eastwest101]

...Mining CAPEX is still nearly 4 times the 2000 level which was roughly the historical average.

While most of those comments are reasonable you really wouldn't be saying that the historical average for Mining Capex was at the year 2000 levels would you? That was the dot com boom and bust with record low oil and metal prices. You may as well say that 1929 was an average year on the stock market!

You are right of course that most markets, and particularly commodity prices and exchange rates, always 'over shoot' on the up and on the down sides. I remember everyone laughing at Pierre Lassonde when he predicted a future gold price of US$2000/Oz in 2002 (I think it may have been?), from 1997 to about 2003 gold was clanking around the US$300/Oz cellar and most economist were writing its obiturary. The laughing definitely stopped once the GFC took hold and the price of gold kept going up.

 

[cove]

The foreign exchange market can quite easily make fools of us. The Aussie dollar is a plaything currency and there is nothing we can do about it.
At work it is so much easier to do export sales when the first number is .7 something rather than 1. something.

 

[Jeffrey O'Neill]

While most of those comments are reasonable you really wouldn't be saying that the historical average for Mining Capex was at the year 2000 levels would you? That was the dot com boom and bust with record low oil and metal prices. You may as well say that 1929 was an average year on the stock market!

You are right of course that most markets, and particularly commodity prices and exchange rates, always 'over shoot' on the up and on the down sides. I remember everyone laughing at Pierre Lassonde when he predicted a future gold price of US$2000/Oz in 2002 (I think it may have been?), from 1997 to about 2003 gold was clanking around the US$300/Oz cellar and most economist were writing its obiturary. The laughing definitely stopped once the GFC took hold and the price of gold kept going up.

It's a few years old chart but it sums things up. difficult to one shower a longer period.

The problem facing the industry is that the upswing was partly driven by the boom itself. new mines and equipment consume large amounts of commodities. New ships to transport the commodities required lots of iron ore and coking coal. over building of capacity in steela nd cemen t in china pushed things along too.

I get the feeling most people have no clue what's happening as the main stream media and Govt focus on headline GDP growth and don't recongnice the fact that the share of the economic pie is growing smaller on a per capita basis. Since the ToT peaked in 2012 (iirc) real per capita disposable income is down close to 6%.

So we've had a 30c fall since the ToT peaked, and we have roughly as much to go to get back to the long term average. Coking coal prices halved in a short time frame with a <10% oversupply in the market. iron ore is heading to around 30% and possibly 50% over supply depending on how much can kicking China does to stop their slowdown glide slope from getting too steep, but then each can kick they do, like in Australia, makes the can a lot heavier as the level of debt required keeps on going up.

I'm just waiting for when the mortgage insure genworth implodes as they are backing something like $320B in mortgages, and a lot of the riskiest ones, and they have about $2.8B in capital to absorb losses with. As an investor a 100% gearing ratio seems high to me, so 113 times that level of gearing in genworth looks to be a ticking time bomb. That'll show just how thinly capitalised the gang of 4 banks are. They were getting away with close to 40 times gearing on mortgages.

 

[Deleted member 6404]

All I can say is Im glade I am out of Debt and am just a spectator watching the train wreck unfolding mainly towards the US and Europe with just a dash of WAR thrown in.

 

[Doctore1003]

There are very few people (if any) who can consistently predict economic or currency movements, which makes sense given the complexity of the task and the fact so many influential "unknown unknowns" will come to the fore.

I'm a currency trader and one of the most important lessons I learned early on in my career is that you have to have an open mind and consider alternative viewpoints. Being a perma-bull or perma-bear shows arrogance and bias, and will cost you in the long run.

So in response to the above posts, I suggest you consider the alternative - what if the global economy is actually about to improve and even enjoy another mini-boom?

Consider:
- the money supply is growing strongly in the EU, China, the USA and Japan - and all at the same time
- the European migrant crisis looks like it could be the catalyst for ending the damaging austerity drive of recent years
- the US economy has shown its resilience post-GFC and proven many pundits wrong; the recovery continues apace
- Chinese growth is still strong and there are signs the transition towards a consumer economy is working

I agree that Australia faces a lot of challenges, and maybe everything will go pear-shaped and the Aussie dollar will indeed head into the 50s, but I would also not be surprised to see us in the 80s over the next few years if global conditions improve.

I'm prepared to make money in either direction.

 

[drron]

US unemployment rate is down according to the authorities.
This graph though points out an inconvenient truth-



The proportion of people participating in the labour force has fallen to levels last seen in 1976/77.
The US economy is not as resilient as it seems.

 

[NFF]

I'm a currency trader and one of the most important lessons I learned early on in my career is that you have to have an open mind and consider alternative viewpoints. Being a perma-bull or perma-bear shows arrogance and bias, and will cost you in the long run.

What's the best currency to hold ?

 

[There'sOnlyOneJimmy]

What's the best currency to hold ?

Maybe the best currency to hold is the currency that you do the most transactions (value) in...

 

[Doctore1003]

Maybe the best currency to hold is the currency that you do the most transactions (value) in...

Exactly. Like I said in my post, it's impossible to consistently predict long-term currency movements because it's impossible to have all the information. In the short and medium term, it's easier, because then you are in the realm of predicting crowd behaviour and the fundamental factors are also easier to distil.

 

[ermen]

i'm short the AUD now and am getting killed over the last 4 weeks or so..
think its a short squeeze happening...

 

[cove]

I switched another $100,000 AUD at 0.7235 and the currency galloped off into the 73 and a half area within 24 hours. Tonight our currency has fallen back into the 72s and I have until the 21st to pay the ATO on two US credit cards. That 0.42% fee is plus or minus the exchange rate of the day I use to process the credit card payment to make AA miles. Picking up about 150,000 AA miles for bugger all cost is what I am trying to do in December. So far Citi US has been great with fair exchange rates to close out these transactions.
So currently I can use 30,000 AA miles to get to Sydney and back to Perth in QF business class 5 times for close to zero final cost out of a month can be seen as living the dream.

 

[Foreigner]

Indeed, the AUD upward momentum appears to have somewhat stalled for the moment.

If 0.7250 breaks we could see lower levels.

 

[marki]

Fallen a little off the cliff hope it bounces back

 

[marki]

What just happened to the dollar .......

 

[turtlemichael]

I'm currently in South Africa and the rand against the Australian dollar has gone from about 10.2:1.0 to 11.5:1.0 in the last 48 hours apparently due to the Zuma government removing the Finance Minister who was regarded by the banks and IMF as the best chance of getting the country's financial woes sorted. Apparently he got a little too active in sorting out government fraud and cronyism for the liking of the elite. Good for me, bad for this wonderful country. It's about the only currency the Little aussie battler is performing well against in the last day or so. If you want a great vacation and extraordinary value for the Aussie this is the place to visit.

 

[Foreigner]

I'm currently in South Africa and the rand against the Australian dollar has gone from about 10.2:1.0 to 11.5:1.0 in the last 48 hours apparently due to the Zuma government removing the Finance Minister who was regarded by the banks and IMF as the best chance of getting the country's financial woes sorted. Apparently he got a little too active in sorting out government fraud and cronyism for the liking of the elite. Good for me, bad for this wonderful country. It's about the only currency the Little aussie battler is performing well against in the last day or so. If you want a great vacation and extraordinary value for the Aussie this is the place to visit.

Sad and bad for SA.

Aussie is .7190 against the greenback right now. Tad lower than this time last week.

 

[Foreigner]

Interesting commentary about outlook for the German economy. Low birth rate, ageing population, immigration.

http://www.express.co.uk/finance/ci...ncial-meltdown-sink-EU-says-expert-Harry-Dent

 

[Doctore1003]

Interesting commentary about outlook for the German economy. Low birth rate, ageing population, immigration.

Germany heading for financial MELTDOWN set to sink the EU, says expert Harry Dent | City & Business | Finance | Daily Express

Harry Dent made a couple of lucky calls a long time ago but since then has been wrong, wrong, wrong. He has no credibility.