(03) 9020 2905I’ve got a fair bit of contrarian in me. It comes from the same part of my brain that screams: “I hate crowds”.
I like people, just not lots of them doing the same thing simultaneously. Writhing throngs annoy me. We get in each others’ way.
I holiday where people aren’t – you might consider them holiday “coldspots”. I hate queueing (but will make an exception if I’ve got a beer in hand). I will actually buy straw hats in winter.
When people have tuned out to shares and property, that’s when I’m interested.
And, obviously, I’m usually completely at odds with the majority because I love debt. Not all the crap debt, like credit cards and store debt. Just the good bits – the big debt that people fear like Freddy Kreuger – like home loans and investment debt.
Whatever everyone’s doing, you’ll often find me doing the opposite.
So, I’ve had to think a little about how I’m supposed to play this latest googly from the Reserve Bank.
The RBA seems to be getting a little impatient, a little frustrated.
They’re in control of interest rates, which have been set to “stupendously low” for years. Levels where they’re effectively saying: “Spend you bastards! Spend!”
More recently, RBA governor Glenn Stevens went to Canberra, where he decided to have a crack at business: “Hey, you buggers! Start investing!”
And elsewhere on these pages today, you’ll find others pointing the bone at banks and telling them to stop being tightwads: “Start lending to small business! You thieving, lying, dirty, conniving, ruthless turds!” (Too strong? Nah! They truly are turds.)
Seems everyone is to blame. Everyone is being too cautious. No-one wants to open up the cashflow and kick-start this economy. We’re all gun shy.
All sectors of the economy are thinking: “Let’s wait for some other idiot to move first”. Send a canary down the mine. If Tweety dies, they’ll sit there a little longer, thanks.
But what’s a contrarian to do?
Being contrarian isn’t always about just doing the opposite of what others are doing – no matter how immensely I enjoy it.
It can also be about leading the pack, doing things before everyone. The first people to anywhere are the ones who either (a) get to enjoy it most, or (b) get to profit from holding all the ace positions.
You can be contrarian by being either ahead of the curve, or so far behind it that you’re leading the second wave, probably much like sporting a mullet now.
Normally, in these pages, I’ve been a proponent of doing the opposite of whatever the RBA suggests that you do.
When they drop interest rates, it’s because they want you to spend. But if they’re lowering rates, it’s usually because they see bad moons rising. And as a result, I tell you to hoard some extra cash.
So what is the RBA saying? They’re saying that all of the ducks are lined up for the economy, but no-one wants to fire off their ammo.
“It’s pretty normal for this point of the cycle. There is always a period in which people can see that many of the conditions for expansion are in place, but aren’t yet fully confident that it will happen,” the RBA told a bunch of Canberra’s hoo-has last month.
And it will happen, says the RBA. It’s confident it will, because banks want to lend us the money and, as households, we’re richer than we were a few years ago anyway ($120,000 per household, apparently). It’s only a matter of time, the gov’nor believes. We will get suckered into it.
The RBA believes the economy is primed. It’s ready to go off like a rock in a sock.
What should you be doing to get ready for this phase that the Reserve Bank is so eagerly awaiting? Should you be gearing yourself to the eyeballs, while rates are low, credit is easy and asset prices seem to still be “reasonable”.
Only you can decide that, taking into account your unique situation and ambitions.
The natural opposite of the contrarian is the one who arrives at the party’s peak.
The RBA has just handed out a rare strong signal that early movers could be rewarded. And the contrarian in me is saying “I can beat those damned crowds”.
Bruce Brammall is the principal adviser with Castellan Financial Consulting and a licensed mortgage broker (www.castellanfinancial.com.au). E: bruce@castellanfinancial.com.au.