I’ve long been concerned about the housing market in Australia where prices have rose unsustainably based on their export driven commodities boom and low unemployment. Delinquencies are increasing quite quickly particularly on the lower quality mortgages and with commodities prices declining the situation is likely to get worse. At T&T Capital Management we rarely short stocks but if we did more actively we would look at shorting Australian banks and being long the U.S. banks to take advantage of this. It is a positive for Australia that China is cutting rates but I don’t expect China’s resurgence to higher growth being predicated on hard materials to the same extent that it has been over the last decade.
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