The Motley Fool

Egg on my face, and the interest rate prediction that went horribly wrong

The Reserve Bank of Australia’s decision to leave interest rates on forced Bruce Jackson to eat a large slice of humble pie.

I must not make predictions…

I must not make predictions…

I must not make predictions…

I must not make predictions…

I must not make predictions…

So…after I boldly predicted an interest cut was a done deal, Glenn Stevens went and ruined my afternoon and left them unchanged. Thanks for nothing, Reserve Bank of Australia.

Needless to say, and deservedly so, my in-box copped it. Here are just a selection of comments…

“Congratulations Bruce, I believe you have now succeeded in predicting at least four or five of the last two interest rate cuts!  If you keep this up you’ll soon be ready for a new career as an economic forecaster.”

“You idiot…”

“It’s never a done deal  :)”

“How aptly named Motley fool, interest rates down eh, it really does show how much you know SFA. And you want us to pay you? What a laugh!”


“Well you truly f***ed that call up. Glad I didn’t plough into the market on the basis of this advice 50 minutes before the announcement. Keep singing the praises of your one victory…How are IDL or SFH or WOW doing. You know what they say about free advice.  It’s worth exactly what you pay for it. Geez u guys are arrogant.”

“There are no certainties in life.”

“Didn’t get that one right. How does it feel to be a f$$$ wit.”

“I wish to be deleted from your database. I have no confidence in your forecasting ability as evidenced by your interest rate story.”

“Egg on your faces here guys. Look forward to hearing your case!!”

I resign…
Obviously my first action point was to offer my resignation. Our Chief Operations Officer, Felix The Wonder Cat, turned it down, but did ask me to write the lines at the top of this email.

My saving grace was tipping last year’s Melbourne Cup winner. But that’s it for predictions…I’m done.

I should have listened to our Investment Analyst Dean Morel. As the calendar ticked over to 2012, he had this to say to Motley Fool Share Advisor subscribers…

“Papers, magazines and other media outlets can’t get enough of economists and other talking-heads who are all too willing to proffer their expectations for the year ahead. Unfortunately their ruminations on the unknowable are only good for entertainment purposes.

The stock market creates wealth over decades, so it’s not a question of whether or not to invest – it’s a question of how to invest. And that’s where we’re here to help.”

Betting on the future
That said, investing is about predicting the future. By investing in an individual company, you are betting on the future.

It could be, with a company like Fortescue Metals Group (ASX: FMG) or Monadelphous Group Limited (ASX: MND), you are betting on their future growth prospects.

Or with a company like Cochlear Ltd. (ASX: COH) you are betting on a combination of recovery and growth.

Or with a company like Ardent Leisure Group (ASX: AAD) you are betting on the value being outed.

It’s just people like me who get themselves into trouble when they predict what might happen from a macro perspective in the coming hours, days, weeks or even years.

Luckily for you, our valued readers, I don’t profess to be an expert macroeconomic forecaster.  I dabble. And I dabbled poorly. Lesson learnt.


All looks good for the millionaire amateur pilot…
What on earth is the Reserve Bank thinking? Perhaps Glenn Stevens spent his summer vacation lazing on Palm Beach, sipping coffee at Portsea, snorkelling off Hamilton Island or sailing at the Royal Perth Yacht Club.

As a reminder, amateur pilot Mr Stevens received a $40,000 pay rise in 2010 to take his salary up to $1.049 million – making him the highest paid public servant by more than $200,000.

Perhaps a trip out to the suburbs every so often might help the RBA get a look at the real world…where confidence is low, jobs are being cut, spending growth is non-existent, mortgage and rent repayments are hurting, energy, transport and food costs are rising, and the soaring Aussie dollar is literally killing businesses.

Instead, the RBA is looking overseas. They are looking at a U.S economic recovery and still robust Chinese growth. But they are looking in the wrong place. They need to turn their focus to the home front.

Anyway, it is what it is. It’s no use crying over spilt milk. In the whole scheme of things, a cash rate of 4.25 per cent versus 4 per cent doesn’t change much. And life goes on…

Dow at highest level for almost 4 years…
Speaking of life, U.S. sharemarkets continue to show plenty of ticker, with the Dow Jones Industrial Average to its highest level since May 2008, as Greece made progress on measures to secure international aid.

Which is more than be said of local markets – the S&P/ASX 200 index is up a measly 8 points. No wonder really, when it is dominated by two large miners and the four big banks, namely Australia and New Zealand Banking Group (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank (ASX: NAB) and Westpac Banking Corporation (ASX: WBC), all of which are struggling for growth.

As if to emphasise the struggle for growth, BHP Billiton (ASX: BHP), the world’s largest mining company by market value, today announced a 5.5 per cent fall in net profits, although revenues increased by 9.7 per cent.

BHP said it expects volatility to persist due to the European debt crisis, and general weakness in manufacturing and construction sectors in its key markets are going to weigh on customer behaviour and sentiment.

If BHP are struggling to grow, in the midst of the biggest boom since the last boom, where do investors turn?

Perhaps this image (found on Facebook) will give you a clue as to where Dean Morel searches for the big investing winners of tomorrow…

Until next time, I wish you happy, profitable, prediction-free investing.

P.S. If you are looking for the bargains of tomorrow, it’s best to look in the unloved and overlooked sectors of the market – avoiding the crowd.

That’s exactly where Motley Fool Share Advisor Investment Analyst Dean Morel hangs out. In Share Advisor’s short history, as of today, our six recommendations are all winners, and are all beating the market, the best recommendation being up 35 per cent.

If you think I’m a f$$$ wit, look away now. But if you’d like to try Share Advisor, taking advantage of our 30-day money back guarantee, a limited number of memberships are still available. Click here now to take advantage of your $170 saving, nearly 50 per cent off our retail price. Share Advisor is prediction-free.

Bruce has an interest in ANZ, CBA, NAB, WBC and BHP. The Motley Fool’s disclosure policy makes no bold predictions.

Please remember that investments can go up and down. Past performance is not necessarily indicative of future returns. Performance figures are not intended to be a forecast and The Motley Fool does not guarantee the performance of, or returns on any investment. All figures are accurate as of 8 February 2012.

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