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.

Invest in Sydney/Brisbane property markets, or for media/public speaking requests, email pete@allenwargent.com

Tuesday, 7 August 2012

OK, rates on hold...now what?

A few key extracts from the RBA’s meeting release today (my emphasis):
“In Australia, most indicators suggest growth close to trend overall. Labour market data show moderate employment growth, even with job shedding in some industries, and the rate of unemployment has thus far remained low.

Inflation remains low, with underlying measures near 2 per cent over the year to June, and headline CPI inflation lower than that. The effects of the price on carbon will start to affect these measures over the next couple of quarters.

As a result of the sequence of earlier decisions, monetary policy is easier than it was for most of 2011, with interest rates for borrowers a little below their medium-term averages.

While it is too soon to see the full impact of those changes, dwelling prices have firmed a little over the past couple of months, and business credit has over the past six months recorded its strongest growth for several years.

The exchange rate, however, has remained high, despite the observed decline in the terms of trade and the weaker global outlook.”

***

Pretty much as expected then, and as I cautioned the Aussie dollar did indeed smash through 106 US cents to a 4 month high earlier today.

The strength of the currency will be the major thorn in the side for the Reserve Bank over coming months, but I’d expect interest rates to stay where they are for a month or three yet.

The outlook for shares?

Are you brave enough to play the stock market at the moment?

Obviously I can’t tell you what will happen to the share market over the coming months, and I’d suggest that anyone who tells you they can be pointed in the direction of the funny farm. The strong dollar will continue to keep any gains relatively moderate I’d expect, though.

Now look, I’ve never been that big on technical analysis, but a chartist might tell you that this is a good time to buy with the XAO (All Ordinaries index) having tested a sticky point of resistance at around 4,200 five times, and now having staged a breakout from this level.

Proceed at your own risk, though.


If you are looking at buying individual stocks you will need to consider which industries are likely to prosper in the current climate.

I’d suggest that those who operate in electronic consumer goods such as Harvey Norman (HVN) are going to have very rough ride over coming months with price deflation impacting that sector of the market very significantly.

The strong dollar will also mean continued pain for those in exporting, and, as I noted yesterday commodity prices also remain fairly soft. Resources companies tend to pay lower dividends in any case, which may not be a good thing for investors in such uncertain times.

There does seem to have been a big bounce in consumer confidence, but it’s also a tricky time for the big players such as Myer (MYR) and David Jones (DJS) as they look to re-focus and compete with businesses which are well established in the world of internet sales.

I can’t suggest individual stocks without getting myself into financial-advice-tinged hot water, but with interest rate cuts seemingly off the table for a while, the Aussie dollar powering along and the warmer summer months approaching, perhaps a good sector to look at would be one in which companies deal in overseas travel (and companies theriein who are well established in internet sales)…

The outlook for property

The property market seems to be establishing a base with prices stabilising and auction clearance rates beginning to rise in some cities in response to mildly stimulatory interest rate levels. If you are investing now, it is important to look at the cities and suburbs that have low vacancy rates and booming rents.

Supply-constrained suburbs of Perth and Sydney are definitely ticking these boxes. Brisbane may be looking to turn the corner too, and is certainly on my watch-list.

***

Another cracking, warm winter's day in Sydney.