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

Friday, 16 August 2013

Is it time to short the stock market?

Poms 3 Green Caps 0

Wow, how good have I been this week? I haven't once mentioned the Poms taking out the Ashes 3-to-zip with a game in hand still to play (well, until now that is).

I had to laugh when I read sections of the gutter press criticising my old team-mate Cooky's captaincy for being "too negative", given that his results record as skipper is virtually flawless. As someone who has endured the largely thankless role of captaining a cricket side in Sydney Grade (you generally seem to get lumbered with 10 other players offering unending tactical opinions, all ten of whom want to bat at number five, bowl at first change and field at first slip), I reckon criticism of international captains should only be allowed by people who have actually done the job. 

Remember the old Roosevelt quote? "It is not the critic who counts...the credit belongs to the man who is actually in the arena..." and so on. Yep, it's just like that. And it's a bit similar when it comes to your investing strategies - whatever you decide to do, you can absolutely guarantee that there will be some smart character who tells you that you that you should be doing something else. Frequently, it's that most annoying and useless of all financial advisors, the good old buddy who has never invested in anything themselves and has no track record of any worthwhile investment success at all.

They trot out supposedly helpful advice such as "it's not a good time to invest in that" or "you should be better diversified" - but if they've never invested successfully themselves then why would you bother to listen?

It's essentially ridiculous. It would be like me opening up today's blog by blithely bagging Winston Churchill's controversial 'Mediterranean Strategy' of 1941-1943, ingeniously designed to expose "the soft underbelly of the Axis". I wasn't there, I have no idea of any of the details and I've never been the Prime Minister of any country - let alone one in the deadly throes of a World War - so I'm totally unqualified to comment. 

When it comes to investing, you must able to block out the noise and work out the best strategy for you and ignore the preachings of the self-proclaimed experts. 

As for investment strategies, well I've never claimed to be a genius (unless of course you count my uncanny timing and ability over the years to make inappropriate comments at barbies) but my basic strategy of holding a portfolio of high-quality investment properties within close range of the city of London and similarly close to the CBD of Sydney (cities which have had the rock-solid fundamentals to result in strong price growth), while continuing to acquire a diversified portfolio of index funds and industrials-focussed dividend paying LICs, has stood the test of time over more than 16 years.

Time to be short?

Stocks are falling in the US in anticipation of the coming Fed taper - so is it time to short the market? 

On balance, it does look likely that there could be something of a correction in the coming months, but personally I never suggest to people when to go short because being a successful short-seller isn't only about market timing. It's also very about money management and being able to close out a position when you get it wrong - and you will certainly get it wrong on plenty of occasions.

You can be sure that at the present time there will be plenty of free advice available on the internet suggesting or implying that you should short individual securities. Income-producing business which advises readers online to buy or sell short individuals stocks should only be undertaken by businesses specifically licensed to do so: it becomes murky territory which falls within ASIC's watchful gaze under the old Corps Act RG 162 regulation governing internet discussion sites, which is why I don't get involved in it.

While on the subject, be equally wary of securities advice from brokers which should not always be taken at face value - you may see buy recommendation after buy recommendation issued by certain nameless brokers on stocks with plummeting market caps, only to later discover that they have been magically and equally responsible for underwriting multiple capital raisings for the very entity being recommended - an absolute cahuna of a conflict of interest.

I will issue one piece of general advice myself here, though, that being: if you don't have a proven track record of successful trading and investing - which can be quantifiably measured over a period of years - don't ever get involved in shorting the market, because you will most likely make a pig's ear of it (just as many did last year when all the awful advice was about shorting the market due to a supposedly forthcoming global turmoil which never actually eventuated).

Best bets

I've always said that the best bet for most average investors is to own a healthy balance of real estate and equities, with a very comfortable buffer of cash. A strong level of diversification and a long-term investment horizon is paramount.

Let's be absolutely clear: most average investors will never create a successful financial future for themselves through facilitating a plan based around ducking in and out of the market in a long-short-long-short manner. The odds are stacked massively in favour of the investor who identifies long-term trends and is able to use compounding growth in their favour over the decades. 

I understand that some people don't want to invest in property because they think that prices will fall - and they most certainly will in some locations, I absolutely agree with that. Others are anti-property because they suggest that it is somehow 'unethical' - each to their own. However, do be wary of advice based around short-selling stocks, trading CFDs or promoting the poor advice of shonky brokers, or whatever else - to build wealth, you need a long-term plan to own assets that pay income and generate growth.

It's interesting to note that there are a spate of articles out this week suggesting that property prices will continue to head upwards as the cycle continues. Shane Oliver of AMP states that there is no Australian housing bubble and that prices will likely increase by 5-10% over the year ahead with Sydney leading the way. Meanwhile, Michael Matusik thinks that prices in the eastern capitals could rise by 25% in the next 3 years with Sydney, Melbourne and SEQ likely standouts.

Will that play out? Hmm. Maybe.

There's definitely no problem from my corner with shunning real estate, but do be wary of the diabolical investment advice to load up your portfolio with gold which was doing the rounds late last year, despite the price being in an obvious bubble. Crumbs, how badly did that one pan out? 

There's since been a bounce which will be accentuated today as stocks fall, but remain very wary, because gold production has reportedly not slowed and the US, Eurozone and Chinese economies are all threatening sustained improvement, so...


Source: kitco

Gold and silver can look like smart investments when the trend line is going up and to the right, but gold bars and coins will never pay you an income, instead they incur storage and insurance costs. In any given year the gold price might or might not do well, but each year precious metals incur costs while a portfolio of profit-making industrial and financial stocks pay a strong income as a century of data demonstrates.

If you must 'go for gold' look towards profitable gold-mining companies or products which pay dividends. But history tells the story that industrials will do better than resources stocks in Australia over the long term.

Ultimately, though, you will do best with a long term plan which involves continuing to acquire income-producing assets with a growth component and benefiting from compounding growth.