Friday, November 28, 2008

Matt Nolan Picks 75 Points on OCR

Matt Nolan is picking a 75 basis point cut in the OCR on December 4, and with OCR.75.4DEC trading at around 4.5 cents, he's going to do very well if he's right.

Matt's reasoning:
All that has changed since October 23 is lower oil prices, a lower exchange rate, and the govt promising a larger fiscal stimulus. This is what the RBNZ said would limit any movement in the OCR in December:

“The reduction in domestic spending will be partly offset by the depreciation of the New Zealand dollar over the past few months, falling oil prices and the recent loosening of fiscal policy”

20 comments:

mc2001 said...

I think Matt must be the only one thinking this


http://www.3news.co.nz/Business/tabid/192/Default.aspx

Matt Nolan said...

Indeed - I wouldn't call it a popular view :P

Kingkarl said...

I'm picking 100 points. Simply because of pressure on food prices and also rates and electricity around the country. 125 points is in my opinion less likely than 60% (current prices) and 100 points is what the economists are picking, so it is quite undervalued at 33c.

Matt Nolan said...

"100 points is what the economists are picking, so it is quite undervalued at 33c"

Actually the median economist is now picking 150bp according to recent polling :)

Kingkarl said...

150bp is the upper range of expectations.

"The Reserve Bank announces any change in the OCR at its Monetary Policy Statement next Thursday. Economists are forecasting a 100 to 150-basis point cut in the rate, which is currently 6.5 percent."

Anonymous said...

Matt is right...8 of 15 in poll released this morning now picking 150bps..ANZ/National and UBS changed today, two others yesterday.

jojo said...

I think the RB will be cautious and either not raise the OCR at all this time or may go the conservative route and lower it by 50 points as they tend to do most often from past history. I have taken positions on 50c & a few on 100c. Fingers crossed, but the prices for these are so rock bottom that if it does not come to pass, the loss is very low, but the potential for a killing bonanza is so much more attractive. Don't you agree?

jojo said...

Putting it nother way with figures: Say you go long with 500 shares for the 50c ocr raise at the current price of 0.0168 or even at say 0.0200. That risks at most $10! But the potential return is 500x$1.00=$500 for a cool profit of $400 for $10 outlay! So the risk is worth it, isn't it?...Am I missing something in my thinking?

jojo said...

oops...I meant OCR rate 'CUT' by 50 points, not 'raise'.

Anonymous said...

9 of 15 economists now expect a 150bp cut this week...bnz latest bank to change view

Matt Nolan said...

Indeed the consensus is for 150 now.

I still see 75% - but without a new set of RBNZ forecasts I can't really say what they are thinking, and therefore have no idea how they will react. We will see :)

jojo said...

The ipredict consensus is at 0.0016 for a 50c cut. Is this a fair figure?

Anonymous said...

RBA have just reduced their rate by a full 1 per cent.

Anonymous said...

jojo...no certainly not fair...price should be zero.

jojo said...

Well, you might be right. On the contrary no one knows the mind of the governpr and how he thinks....Could be a 25% cut, 50, 75, 100, 125, 150, 175, 225, 250, ...or NO CUT at all!...HE will have the last laugh!...Will be very interesting this prediction!...Can't wait!

Anonymous said...

what we do know is that he usually follows the market and as of today there was 143bps priced in for Thursday's meeting and another 75bps priced in for the 29 Jan meeting. That is a strong mandate. I'd say it is 125bps-150bps with an outside chance of 200bps.

Anonymous said...

i think 100 points is more likely than a measly 17% chance, sure its the underdog, but by that much???

Colonel said...

i think 100 points is more likely than a measly 17% chance

Well, buy some 100 stocks ;-)
I have!

I see Stuff are running a poll today, with 100 points well ahead.

Anonymous said...

i think that simply illustrates how few NZers understand what is happening offshore and how this is going to impact NZ - and their jobs - in 2009.

Anonymous said...

i think central banks understand though...RBA yesterday cut its rate back to where it was at the lowpoint of the previous cycle. A 150bp rate cut will do the same in NZ (cash was at 5% in late '03, although it had been at 4.75% in early '02 prior to an aborted tightening cycle).