Oil Price and Interest Rates

Most people have been forecasting the interest rates to rise by 2015, including me. The chorus of selling bonds and REITS in anticipation of such a scenario have been deafening. The chorus of selling shares now in anticipation of tightening and interest rate rise has also been deafening.Having held off doing anything in the past 2 years , other then buying Super Group (yes, im still holding on) and buying and selling Jardine CC), i finally gave in to picking up some other shares, given the change in market conditions and also the uncomfortably high proportion of cash i hold.

The US Fed desires an about 2% inflation growth and a low unemployment rate. Currently, the inflation rate is low at about 1.7%. With oil price being DECIMATED, i do foresee a reduction in inflation rates and HENCE no pressure on the US Fed to increase the interest rates to squall any runaway inflation scenarios. The act of China lowering their interest rates and Europe, together with Japan, doing QE makes it even harder for the US Fed to raise interest rates which if they do, would increase their US dollar strength and hurt US employment.

I got this feeling that since QE, ultra low interest rates have not helped, now oil prices through shale oil production are being used to spur the economic engine by US. They do have a lot of tools.

Seems bullish for the general stock market.

Total Debt Servicing Ratio (TDSR) for Property Loans - a very pleasant surprise

I haven't been looking at properties for some time but i had a pleasant surprise when a friend told me that I could actually use my equity portfolio to 'increase' my gross monthly income so that i can borrow more for a property loan based on Total Debt Servicing Ratio (TDSR)

Examples of some eligible financial assets to 'increase' ones gross monthly income

Gold, unit trusts, structured deposits, stocks, debentures

If i pledge these financial assets to the bank, i could use 70% of its value to 'increase' my gross monthly income. However, if these are not pledged, i could only use 30% of its value.

Gross monthly income from eligible financial assets = (70% or 30% X eligible financial assets) divided by 48

Say for example, SGdividends happens to have $1 million worth of eligible financial assets.

Pledge to the bank

70% X $1 million = $700,000

'Increased' gross monthly income = $700,000/48 = $14,583.33

Do not pledge to the bank

30% X $1 million = $300,000

'Increased' gross monthly income = $300,000/48 = $6,250

Now, that's a lot of 'additional' gross monthly income. However, this is what the MAS guideline (MAS notice 645) allows and i have not verified how much more stringent the banks will be.