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).

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 is 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 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'.

"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 of the world's most popular & widely-read financial publications.

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

Thursday, 19 June 2014

Dimming prospects for stocks

It's been an amazing half decade for share market valuations, with stocks now trading at record highs in the US.

The Dow is getting close to hitting 17,000 for the first time in its history as the Fed taper continues on its path, with the DJIA closing up 0.6% at 16,907.

Meanwhile the S&P 500 is close to hitting a record 2,000, up overnight by 0.77% to 1,956.

In Australia, we haven't yet scaled new share market heights. In fact, valuations are broadly unchanged in around 8 months now.

See here for a great article from value investing guru Roger Montgomery, explaining why there is no longer any deep value to be found in the Aussie market. 

The easy wins of the last half decade have been picked off and now presents a far more difficult prospect to find any genuine value in the market.

The Reserve Bank's chart pack back this up, with trailing PEs firing up into the high 'teens'.

Trailing P/E Ratios graph

Super article, and one which I found was worth reading, digesting and then re-reading:

"Not only is there not an abundance of value, there’s a complete absence of it.  As a result our process produces a relatively high level of cash on The Funds. 

The combination of deteriorating earnings and economic outlook for major Australian industry sectors, along with the rising interest rates offshore (at a time of deteriorating growth) and an extended period of very low volatility make me increasingly convinced that now might just be the time to be insuring.

That could mean selling the most expensive stocks in a portfolio but it could also mean not deploying additional cash. In both The Montgomery Fund and The Montgomery [Private] Fund a relatively large proportion is already parked in the safety of cash.
While I contemplate the above, I cannot forget we manage a portfolio of quality businesses and we try to buy them at attractive prices and hold for as long as the prospects are good.  It’s just the prospects part that I am becoming increasingly concerned about…"