Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Saturday, 14 January 2017

What's around the corner?

The greatest

I once saw an interview with the legendary television commentator Murray Walker, veteran of more than half a century in motorsport, in which he was asked his opinion on the greatest Formula 1 driver of all time. 

With drivers like Ayrton Senna and Michael Schumacher on the scene, if there was one thing I was certain of it was that Walker wouldn't give a straight or definitive answer.

Yet he did exactly that: "Juan Manuel Fangio".

Maturing with age

Recently Max Verstappen, son of the Dutch Formula 1 driver Jos Verstappen, won his first Grand Prix at the age of 18, having begun karting at the age of four.

The Argentine racer 'El Maestro' Fangio, on the other hand, did not even commence his Formula 1 career until he was a mature age, winning his first title in his forties (there's hope for me yet!), in an era with very little driver protection when a crash often meant an untimely death. 

At the Monaco Grand Prix in 1950, there was a huge pile up of cars around the famous Tabac corner, completely hidden from El Maestro's view. 

As he tore along the track's Monaco harbourside it seemed certain that he would crash at an enormous speed into the wreckage, yet as he approached the blind bend, Fangio instinctively slowed, and managed to avoid a possibly fatal collision. 

Naturally, he went on to win the race. 

Intuition, or a sixth sense?

Being involved in motorsport in such a lethally dangerous era, it's no surprise that drivers could become deeply philosophical about such moments.

Had God spoken to him warning him to ease off the accelerator, Fangio wondered?

Upon much thought, Fangio realised that he intuitively knew that something was different; something was not right as he approached Tabac. But what?

What was different was the colour of the crowd in the grandstand.

Nearly a decade-and-a-half earlier, there had a been a similarly dramatic crash, and Fangio had seen a photograph of the incident in which the fans in the crowd had turned their heads to look at the carnage.

As Fangio flew down the straight towards Tabac in 1950, in his peripheral vision he somehow clocked that the crowd was not looking down the straight at him, but instead had turned as one to survey the carnage.

He was seeing the backs of their heads, his instinct told him to slam on the brakes, a potentially life-saving course of action. 

What's around the corner?

Obviously, mine is a blog about finance, not motorsport (which is just as well, for it would be a very short-lived blog otherwise). 

Most of us will never achieve these abilities or this level of intuition, and we can't easily know what's around the corner. 

The cycle, however, is approaching an advanced stage, and most assets are priced expensively.

In the US the Federal Reserve is now tightening interest rates, and globally inflation seems set to rise. 

And after a dramatic rebound in bulk commodity prices this year, there is a very real chance of substantial correction in these markets too, which is relevant to the outlook for Australia. 

I don't know if there's a crash around the corner. You don't know if there's a crash around the corner!

Even El Maestro didn't know for sure what was around that wretched corner.

But the heads in the crowd have turned in a different direction - after years of looking straight down the barrel at falling interest rates and fears of a deflationary spiral, they are now looking ahead for something different. 

It's not a time to panic, but it is a time to be aware of the risks.