A Cynical Investment Idea: Profit From Australia's Misfortunes
I just came across an article which makes a pretty convincing case that there is still a massive housing bubble in Australia, which for some reason hasn't burst yet. It sounds like a ticking time bomb to me.
Here's the idea:
When the housing bubble burst in the states, it caused a temporary spike in the US dollar. If the same thing happens in Australia, then we should see an increase in their currency, right?
Only this time it won't be temporary: the Australian dollar should jump in value, and from there it should just keep rising, as their houses drop in value and unemployment rises.
The annual inflation rate in Australia is currently at 1.48% and dropping rapidly, according to this source:
If their markets crash, they could be in for a serious "deflationary spiral". Forget about stocks... the safest and best way to play this scenario is simply to buy and hold Australian dollars.
And don't worry about their interest rates: it's the inflation rate that matters (I think). My plan is to hold Australian dollars until their inflation rate is higher than ours... which I don't think will happen for quite some time.
I'm thinking of making this trade in my real-life portfolio, and this will be my first currency trade ever... so if it sounds like a stupid idea, please let me know!