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May 20 Update – Trevor Thompson

From the broker report.

“US San Francisco Federal Reserve President Williams and Dallas Fed President Fisher spoke at a monetary policy conference. Both speakers agreed that the super-easing monetary policy conditions could have adverse consequences in the long run – resulting in excessive asset price growth and encouraging investors to take on too much risk. However Williams doesn’t believe rates should rise till the second half of 2015.”

What this means. If rates stay too low too long, cheap money will lead to poor investment decisions and asset price (shares and property) bubbles. We know what happens to bubbles.

World leaders are walking a tightrope between stimulating economies still recovering from the GFC and OVER stimulating them leading to the next bust. I hope they get it right. The good thing is, bubbles are easy to spot. The hard part is being disciplined enough to take the right action when you spot one!!

By Trevor Thompson. 
CFP DipFP

SENIOR PARTNER

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