Missing Money !

    It is a story as predictable as any era of history.   When an event disrupts the  business cycle, interest rates retreat and the people who rely on the interest from their capital desperately seek some sort of investment that will preserve their way of life.

The event that  sent interest rates plunging this time was a pandemic which saw our Reserve bank lower official interest rates to an abyssmal low.  This hit service industries like pubs and cafes particularly hard and stopped crowds from pouring into cinemas and other forms of entertainment.  In particular, it decimated the job market and sent government spending into the red  as relief money was desperately needed.

For over a year a safe form of investment that pays a decent interest rate has been impossible to find, and the rumour mill has bestowed one investment adviser with near genius capabilities.  Against the run of business predictability this unlicensed financial adviser was thought capable of returning invested money at a far better interest rate than the banks were offering.

Now that woman has mysteriously disappeared - and so has the invested money !  There was panic in the investment community last November when she could not be quickly located and ASAIC closed down her accounts and seized more than a million dollars worth of luxury goods and jewellery.

But it got far worse as time progressed.  It was initially estimated that this woman had defrauded her investors of about  twenty five million dollars with most of it spent on her lavish lifestyle, but those figures appear to be consistently low.  It is now thought that the loss may grow to several hundred million dollars.

This woman lived in a rented mansion at Dover Heights, with her hairdresser husband and their children.   Her husband's $ 300,000 Audi has just been repossessed and the court has frozen further living expenses for her family. 

This debacle underlines the danger of paying heed to rumours of financial genius and moving outside traditional investment circles.  The big end of Australian industry has been performing normally throughout this coronavirus pandemic and the arrival of vaccines will enable the service sector to recover fairly quickly.

Even now, the banks are starting to offer a better return on investment money than the rate struck by the Reserve bank and that interest rate will grow quickly as industry seizes the expansion opportunities offering.  The actual interest rate is governed by the banks need for money to extend their lending portfolios and this is quite different to the needs of the Reserve bank.

It is now highly likely that the interest rate of the Reserve bank and the Commercial banks will differ sharply in the months ahead.  It will certainly be some time before we see the rates paying on term deposits return to what we consider " normal " levels, but we would be well advised to remember that old adage that applies to the money market.

If it looks too good to be true - then it probably is !