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Co-founder & CEO of AllenWargent property buyers & WargentAdvisory (subscription market analysis for institutional clients).
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Pete Wargent blogspot
Co-founder & CEO of AllenWargent property buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place), and CEO of WargentAdvisory (providing subscription analysis, reports & services to institutional clients).
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.
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"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'.
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Sunday, 5 October 2014
Where did it all go Wonga?
Business model gone Wonga
Auntie BBC reports than payday loans company Wonga is to face a substantial write-off more than £220 million in customer debts.
To put that in perspective, even when things were going great guns for Wonga its 2012 its net profits were only £62 million from revenues of £309 million. Ouch.
Back in the 'glory days' Wonga was valued at more than £2 billion, but that looks to be a mite optimistic in these new climes where sentiment towards payday loans companies has turned decidedly sour.
Regulators crush Wonga
Meanwhile some 45,000 customers who are in arrears will not be required to pay interest on their debts.
Regulators have been all over the Wonga fiasco and what they found has not made for pretty reading. Earnings have been halved but the loan company's problems run much deeper than that - the business model has been broken in half.
Loan companies such as Wonga can charge an APR of up to 5853 percent on debts, the general idea being that people might use a payday loan company (instead of paying £25 for an overdraft) with the plan to repay the balance quickly.
But it has all begun to unravel for Wonga of late. In recent months it transpired that in a stroke of severely misguided genius thousands of borrowers had been sent fake legal letters instructing them to pay up or face the consequences, while others will be compensated to the tune of more than £18 million in aggregate for miscalculated interest charges.
Practices to be amended
After a brutal review by the Financial Conduct Authority (FCA) Wonga has put out a new announcement stating how it will fall into line through amending its practices, in particular vowing to loan money only to those who can reasonably afford to repay it.
At first blush this is great news, with the regulators tightening up the practices of payday loan companies dramatically, which few can be unhappy about.
That said, there will always remain a risk that restrictions on loans will send those in genuine need of short term capital back to the pawn-brokers or the seedier underworld of loan sharks, of which Britain has a long and unsavoury history.
As an interesting aside, while the Archbishop of Canterbury is today one of Wonga's most outspoken high profile critics, until only very recently the Church of England held an indirect investment in Wonga buried deep within one of its venture capital investment funds (albeit an immaterial one).
To be sure ethical investment is a perennial challenge for stockholders, for if you follow your funds through to their destination you will certainly find that a distasteful element exists somewhere along the line.
I recall some years ago being lectured in a friendly manner by a "shares only" advocate that Sydney residential property was not only a poor investment, it was a deeply unethical one, driving up the price of housing.
Of course, in any properly functioning housing market higher prices should encourage new supply, and over time markets should be self-correcting (not that this always plays out in a timely manner).
Natch when we discussed his most substantial holdings it was rather a case of: "I don't speculate in property, personally I invest for strong income streams and I strongly recommend Commonwealth Bank, ANZ, Westpac, the NAB...".
You could variously make a case for unethical investment in any of the evil banks (SUN, AMP, BOQ), the resources companies who tear up our weeping planet (BHP, FMG, RIO, NCM, STO etc. etc.), retailers such as Woolies (WOW) who have generated millions from pokie machines, airports and airlines which facilitate pollution from leisure travel (SYD, VAH, QAN), companies associated with gambling revenues (TAH, CWN), tobacco companies, and so on.
Trouble is, by the time you have rustled up your shortlist you have chewed your way through most of Australia's largest companies by market cap.
An interesting and highly subjective debate for another day!