Pete Wargent blogspot

Co-founder & CEO of AllenWargent property advisory & buyer's agents, 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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Sunday, 3 June 2012

Where might interest rates be headed? (from the ASX)



According the the ASX's Interbank cash rate futures implied yield curve chart (try saying that with your mouth full!) as of 1 June, interest rates may heading down by a further 1% or more within the next 12 months (the current official cash rate is 3.75%).

What does that mean?

Effectively that interest rates could be cut four or more times in the next year. In short, the market is pricing in a rough road ahead for global economies, and the Reserve Bank could be frantically slashing interest rates in a bid to stimulate economic activity.

Implied yield curve charts aren't a prediction of the future, as such - rather they reflect a balance of probabilities. So the market prices in the likelihood of a range of outcomes and the impact of those outcomes on future interest rates and yields.


It has been said that the Aussie dollar will have to fall from its current level of around 97 US cents to 90 cents or below in order to entice foreign investors back into the property market. Well, if rates are cut multiple times, then the Aussie dollar will almost certainly be headed significantly lower.

Lower mortgage rates would also see domestic investors and homebuyers back into the market and the lower rates would also see positive-cash-flow investment properties abound once again. Expect to see unit values on the up if multiple rate cuts eventuate.


The graph above implies that the market is extremely jittery and anxious (so am I, in fact, but that's because I have had 3 cups of coffee today) and it could well be a miserable year ahead for shares. In fact, equities were off some 7.5% in May, erasing 2012 year-to-date gains. Yet another crap year for superannuation funds pending...