This week James and Anthony go inside Regal’s bid for Platinum and question the Fed’s call on rates.
This week James and Anthony go inside Regal’s bid for Platinum Asset Management, ask how quickly the RBA can follow the Federal Reserve to cut rates, and examine what it might take to bring bank share prices back to earth.
It would be unfair to call Platinum, or its style of active funds management, a sunset industry, but it is extremely challenged. We’re not in that sort of situation now, Anthony, so what reason did Powell give us for providing this super-sized cut?He says the Fed has greater confidence that inflation is headed back to 2 per cent so you can afford to let the handbrake off a little bit and cut rates by 50 basis points and get monetary policy back closer to what it would consider a neutral setting.
And it’s not a small bit of insurance, it’s a big bit of insurance. So that’s the confusing bit, it’s a really mixed message that you know nothing bad is going to happen, but just in case it could, here’s a big rate cut. It is as clear as mud.Investors have been waiting for this rate cut, I would have thought it was priced in … but all of a sudden it seems investors have got a second wind.
In particular, shares in Commonwealth Bank and National Australia Bank are on an absolute tear up 40 per cent and 35 per cent respectively this year, despite rate cuts, despite being among the most expensive banks in the world, and despite a sluggish Australian economy, which limits their earning growth.I think my first answer is never. Based on what I’ve seen this year, banks will just keep going up forever more. People are completely in love with them. They do not want to sell them.
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