Pete Wargent blogspot

Co-founder & CEO of AllenWargent property advisory, offices in Brisbane (Riverside) & Sydney (Martin Place) - clients include hedge funds, resi funds, & private investors.

4 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the better property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete Wargent is one of Australia's brightest financial minds - a must-follow for articulate, accurate & in-depth analysis." - David Scutt, Business Insider, leading Australian market analyst.

"I've been investing for over 40 years & read nearly every investment book ever written yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.

"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data and charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, and author of the New York Times bestsellers 'End Game' and 'Code Red'.

"Pete's daily analysis is unputdownable" - Dr. Chris Caton, Chief Economist, BT Financial.

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Tuesday, 17 April 2012

Have Aussie stocks bounced back to pre-GFC levels?

Well, the answer is quite clearly no.

While US stocks have actually doubled since their nadir of 3 years ago and are hovering around only 10% off their all-time highs, Aussie stocks have not bounced back to anything like the same degree.
There could be a number of reasons for this, but the clearest factor must be the strength of the Australian dollar.

Back in 2008, the Aussie dollar was comparatively weak, buying only around 65 US cents – now it is buying more than $1.00 of US currency.

Although it is difficult to know precisely, somewhere in the region of a quarter of Australia’s share market is owned by overseas investors: a strong dollar discourages overseas investors, for their functional currency does not go as far and they are exposed to increased foreign-exchange risk.

The strong currency reflects the wonderfully strong position of the Australian economy as compared to other world powers. With low unemployment at 5.2%, inflation well under control and GDP growing, it’s extraordinary that we can somehow have such an unpopular Prime Minister.

While the US has interest rates at emergency levels of 0.25% and the UK having held rates at 0.5% seemingly forever now, Australia still has a significant interest rate buffer.

Despite rate cuts in November and December 2011, the cash rate Down Under is at 4.25%.  Naturally, these comparatively attractive rates therefore snare investment in to fixed interest investments, strengthening the currency.

Most Australian economists are tipping Aussie interest rates to slip back to 4.00% in May, pending the inflation results of April 24.

Meanwhile, ANZ is the latest bank to sneak a few extra points on its mortgage rates, citing higher funding costs as its defence (of course, to understand the real reason for their increased rates, Google the world oligopoly!).