Pete Wargent blogspot

Co-founder & CEO of AllenWargent property buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place), & CEO of WargentAdvisory (providing subscription analysis, reports & services to institutional clients).

5 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's one of the finest property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete 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 & charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, author of the New York Times bestsellers 'End Game' & 'Code Red'.

"The level of detail in Pete's work is superlative across all of Australia's housing markets" - Grant Williams, co-founder RealVision - where world class experts share their thoughts on economics & finance - author of Things That Make You Go Hmmm, one of the world's most popular & widely-read financial publications.

"Wargent is a bald-faced realty foghorn" - David Llewellyn-Smith, 'MacroBusiness'.

Thursday, 11 May 2017

Margin call

At the margin

An interesting data series from the Reserve Bank of Australia (RBA) charted below shows the rise and fall of margin lending accounts.

At the peak some $93 billion of securities were owned with $43 billion of margin debt against them.

Suffice to say that when the stock market crash came, both the number and value of margin lending accounts capitulated pretty quickly.

Interestingly the popularity of margin loans has never recovered, and that's despite interest rates being way lower than they were at the peak of the boom. 

And margin lending won't be making a comeback any time soon - aggregate credit limits have continued to decline, now down by 47 per cent from the peak to be at their lowest level since 2005.

This is partly because CFD firms have largely replaced the drop in margin lending, with these figures not captured in the RBA's data series. 

Furthermore, it has become more difficult to gear up significantly with lenders into the stock market using margin loans, whereas before the financial crisis margin lending had come to be considered to be a normal part of trading.

It's also often cheaper to use home equity to invest in stocks, which has the added advantage of no margin calls being issued. 

Low volatility

In the December 2016 quarter the average number of margin calls per day declined to the lowest level since the beginning of 2007. 

This reflects a generally rising stock market and that lenders only allow moderate leverage against all but the blue chip stocks.

Before everyone gets too complacent, the last time margin call activity was this low there was a 40-fold increase within the following eight quarters.