1
00:00:03,760 --> 00:00:06,080
Speaker 1: Welcome to Ask Fear and Greed, where we take your

2
00:00:06,160 --> 00:00:08,440
Speaker 1: questions and do our best to answer them. I'm Michael

3
00:00:08,440 --> 00:00:09,080
Speaker 1: Thompson and.

4
00:00:09,119 --> 00:00:11,200
Speaker 2: Hello Sean Aylmer him Michael.

5
00:00:11,320 --> 00:00:16,080
Speaker 1: Sean great question today from Howard on LinkedIn, and Howard's

6
00:00:16,079 --> 00:00:18,200
Speaker 1: obviously gone to LinkedIn. You can do it also via

7
00:00:18,239 --> 00:00:21,599
Speaker 1: Instagram or Facebook or fearangreed dot com dot au. Send

8
00:00:21,640 --> 00:00:23,720
Speaker 1: you a question in like how it has done. He

9
00:00:23,800 --> 00:00:27,320
Speaker 1: says there are winners and losers from an interest rate cut.

10
00:00:27,440 --> 00:00:30,320
Speaker 1: I get that anyone with a home loan would benefit

11
00:00:30,640 --> 00:00:35,440
Speaker 1: from a reduction. They are the winners, but who actually loses?

12
00:00:35,560 --> 00:00:36,560
Speaker 1: It's a good question.

13
00:00:38,120 --> 00:00:40,080
Speaker 2: It is a good question. Sell us think this through.

14
00:00:40,720 --> 00:00:44,680
Speaker 2: The opposite to people with loans are depositors. So if

15
00:00:44,720 --> 00:00:48,280
Speaker 2: you're putting your money to the bank, you're getting a

16
00:00:48,280 --> 00:00:51,479
Speaker 2: return on that. If interest rates are lower, your return

17
00:00:51,720 --> 00:00:54,639
Speaker 2: is lower. So pensioners are the obvious one, Howard. They

18
00:00:54,720 --> 00:00:58,000
Speaker 2: often put money in banks, and how I have termed

19
00:00:58,080 --> 00:01:01,040
Speaker 2: deposits the interest rate they get on that is lower.

20
00:01:01,520 --> 00:01:05,160
Speaker 2: Safe investments tend to yield less. So when I say

21
00:01:05,200 --> 00:01:09,319
Speaker 2: safe investments, I'm like holding cash or buying government bonds,

22
00:01:09,360 --> 00:01:12,480
Speaker 2: that type of thing. Lower interest rates the yield on

23
00:01:12,560 --> 00:01:16,240
Speaker 2: those tends to be less. So if you are buying

24
00:01:16,240 --> 00:01:19,240
Speaker 2: and holding onto it for a long term, that tends

25
00:01:19,319 --> 00:01:23,200
Speaker 2: to be less. First time buyers, do they win or lose?

26
00:01:23,240 --> 00:01:27,560
Speaker 2: We would think that they should win from a lower right.

27
00:01:28,200 --> 00:01:29,400
Speaker 1: I know where you're going here.

28
00:01:29,760 --> 00:01:32,920
Speaker 2: But if this sparks the market, if this triggers people

29
00:01:32,959 --> 00:01:36,040
Speaker 2: to buy property, pushes up the price, is that good

30
00:01:36,080 --> 00:01:37,040
Speaker 2: for first time buyers?

31
00:01:37,120 --> 00:01:40,080
Speaker 1: No, of course, But I mean it's a balancing act, then,

32
00:01:40,120 --> 00:01:42,160
Speaker 1: isn't it. They're going to have to be paying less

33
00:01:42,160 --> 00:01:45,040
Speaker 1: on their repayments once they actually get a loan, but

34
00:01:45,120 --> 00:01:47,840
Speaker 1: they're going to be competing potentially against more people, and

35
00:01:47,880 --> 00:01:49,480
Speaker 1: the prices are going to be higher that they're paying

36
00:01:49,520 --> 00:01:52,080
Speaker 1: in the first place, So they're exactly on balance, it

37
00:01:52,200 --> 00:01:52,960
Speaker 1: probably loses.

38
00:01:53,560 --> 00:01:56,200
Speaker 2: Then there are certain stocks that I mean, we talk

39
00:01:56,240 --> 00:02:01,760
Speaker 2: about interest rate sensitive stock, cyclical stocks. So let's take

40
00:02:01,800 --> 00:02:04,640
Speaker 2: it coming like dab high Fight. When interest rates are falling,

41
00:02:05,080 --> 00:02:07,360
Speaker 2: people think, oh, more money people's pocket. We're going to

42
00:02:07,360 --> 00:02:11,040
Speaker 2: buy jab high Fight shares. So consumer discretionary stocks they're called,

43
00:02:11,200 --> 00:02:13,079
Speaker 2: and there's a bunch of companies out there like that.

44
00:02:13,160 --> 00:02:15,480
Speaker 2: There's also a bunch of companies that are the flip

45
00:02:15,520 --> 00:02:18,440
Speaker 2: side of that. So when interest rates are rising, maybe

46
00:02:18,440 --> 00:02:21,640
Speaker 2: we should invest in those things like consumer staple companies,

47
00:02:21,880 --> 00:02:25,480
Speaker 2: coals and woolies, utilities companies. Tellcase, they're just companies that

48
00:02:25,560 --> 00:02:28,720
Speaker 2: tend to do better when there's not a cycle going on,

49
00:02:29,320 --> 00:02:33,280
Speaker 2: So there's as ones. What about travelers, Michael? What about travelers?

50
00:02:33,680 --> 00:02:36,639
Speaker 2: If the Reserve Bank cuts the interest rates once twice,

51
00:02:36,680 --> 00:02:41,639
Speaker 2: three four times, that puts downward pressure on the Aussie dollar. Now,

52
00:02:41,680 --> 00:02:43,520
Speaker 2: some of us might want to go overseas, but if

53
00:02:43,520 --> 00:02:47,720
Speaker 2: the Aussie dollars worth less, then that doesn't help us

54
00:02:47,720 --> 00:02:52,120
Speaker 2: when we're going overseas. So at the margin, lower interest

55
00:02:52,200 --> 00:02:54,079
Speaker 2: rates does not help overseas travelers.

56
00:02:54,120 --> 00:02:56,560
Speaker 1: Why does it put downward pressure on the Aussie doll.

57
00:02:56,560 --> 00:02:58,760
Speaker 2: Because people buy and sell the Aussie dollar in the

58
00:02:58,760 --> 00:03:01,760
Speaker 2: short term at least on the return they get our

59
00:03:01,840 --> 00:03:04,600
Speaker 2: interest rates in Australia versus whatever the rates are in

60
00:03:04,639 --> 00:03:07,160
Speaker 2: the US or Europe. So if our rates are falling

61
00:03:07,960 --> 00:03:11,360
Speaker 2: visa those rates, then people don't want Ausie dollars. That

62
00:03:11,400 --> 00:03:13,720
Speaker 2: puts downwards pressure on the Aussies that might be worth

63
00:03:13,720 --> 00:03:16,480
Speaker 2: sixty sixty one cents not sixty three sixty four cents.

64
00:03:16,800 --> 00:03:18,760
Speaker 2: And then if you're traveling overseas and it's worth sixty

65
00:03:18,760 --> 00:03:21,079
Speaker 2: sixty one cents. Not so good?

66
00:03:22,280 --> 00:03:26,160
Speaker 1: Okay. The thing is that in the media, right, everyone

67
00:03:26,200 --> 00:03:29,359
Speaker 1: always just talks about mortgages, mortgages, right, and there is

68
00:03:29,360 --> 00:03:31,760
Speaker 1: an entire there's a flip side to that entirely, isn't there,

69
00:03:31,880 --> 00:03:34,440
Speaker 1: And you feel a bit sorry then for the pensioners

70
00:03:34,480 --> 00:03:36,720
Speaker 1: and the others who are going well, actually we would

71
00:03:36,760 --> 00:03:38,600
Speaker 1: prefer these rates, not that they'd ever come out and

72
00:03:38,640 --> 00:03:39,400
Speaker 1: say that. Sea.

73
00:03:39,480 --> 00:03:42,040
Speaker 2: I wonder so about in the mortgage market. About a

74
00:03:42,120 --> 00:03:46,000
Speaker 2: third of mortgages, sorry, a third of homes are under MORTGAGEE,

75
00:03:46,320 --> 00:03:49,120
Speaker 2: a third are paid off, and a third of like investment.

76
00:03:49,240 --> 00:03:53,600
Speaker 2: So renters. Potentially, if I have an investment property and

77
00:03:53,640 --> 00:03:56,440
Speaker 2: interest rates have fallen down, I don't feel under pressure

78
00:03:56,440 --> 00:04:03,559
Speaker 2: to lift up rental rates to repay my mortgage. So theoretically,

79
00:04:03,600 --> 00:04:07,640
Speaker 2: at least this takes pressure off renters. So falling interest

80
00:04:07,720 --> 00:04:10,760
Speaker 2: rates might actually be good for renters as well.

81
00:04:12,360 --> 00:04:18,800
Speaker 1: All right, So losers, pensioners, people with term deposits, any

82
00:04:18,800 --> 00:04:24,760
Speaker 1: of those kind of safe share prices of the interest

83
00:04:24,839 --> 00:04:29,480
Speaker 1: rates sensitive stocks, first home buyers and travelers, and then

84
00:04:30,080 --> 00:04:32,400
Speaker 1: pretty much everyone else in the winners category.

85
00:04:32,360 --> 00:04:34,920
Speaker 2: I'm sure there's a bunch of appearable listing of his name.

86
00:04:35,320 --> 00:04:37,720
Speaker 1: What about what about me? True?

87
00:04:37,880 --> 00:04:42,280
Speaker 2: We broadly we think of the deposit holders and pensioners

88
00:04:42,279 --> 00:04:44,039
Speaker 2: and that as the people who lose out most.

89
00:04:44,160 --> 00:04:46,320
Speaker 1: Okay, all right, good question, Howard.

90
00:04:46,440 --> 00:04:47,200
Speaker 2: Well done, Howard.

91
00:04:47,320 --> 00:04:50,520
Speaker 1: Yeah made us think. That's Sean think. This is good.

92
00:04:50,520 --> 00:04:53,200
Speaker 1: I love this. Thank you Howard for your question. Thank

93
00:04:53,240 --> 00:04:54,000
Speaker 1: you Sean for answering.

94
00:04:54,080 --> 00:04:54,599
Speaker 2: Thanks Michael.

95
00:04:55,000 --> 00:04:56,720
Speaker 1: If you have your own question that you would like

96
00:04:56,760 --> 00:04:59,600
Speaker 1: to put to us, then please jump on to LinkedIn

97
00:05:00,360 --> 00:05:02,800
Speaker 1: like how did our Instagram, Facebook or a fearangreed dot

98
00:05:02,800 --> 00:05:04,479
Speaker 1: com today? You send you a question through and we

99
00:05:04,520 --> 00:05:06,720
Speaker 1: will answer it as soon as we possibly can. Oh,

100
00:05:06,760 --> 00:05:09,039
Speaker 1: Michael Thompson, And this is ask Fear and Greed