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.

"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.

Wednesday, 14 January 2015

Dr. Copper is the next to go Splat!

Commodity correction continues

It's been a helluva ride for commodity prices lately, and not in a good way!

The iron ore price boom, boom, boom...and bust...has been well documented.

World dairy prices were really put through the proverbial mangle in 2014.

The respective spot prices of gold and silver crashed, although gold is now staging a moderate rally as fear levels in global markets tick higher.

The price of crude oil has completely collapsed to well below $50 - although at least this represents far from all bad news, particularly for consumers.

Coal collapse

Coal prices are now below GFC levels having taken an extraordinary swan dive, which does not bode at all well for Australia's coal mining regions.

Much of our coal mining is simply not profitable at these prices and closures have inevitably resulted.

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I must confess to having been extremely sceptical as to whether Adani would get its proposed Galilee Basin project up - the figures didn't seem all that compelling, and that's an understatement (if the coal price was at $100/tonne, perhaps, but...) - but word is that billions are set to be invested in the Carmichael Project after all.

On the face of it that's great news! 

Although I'm completely flummoxed as to how the mine will ever make a profit at these price levels, unless the project is a pure multi-billion dollar speculative gamble on a coal price rebound? Beats me.

I still reckon you need your head read if you want to invest (speculate) in such property markets, but do accept that in property investing it's a case of "to each their own".

Copper next to crash

Copper is the next commdity to go splat.

Although not yet reflected in the below chart the price has plummeted by another ~5 percent to just ~US$2.50/lb.

This is not great news for South Australia or those spruiking the forever "imminent" $30 billion Olympic Dam expansion, which also won't be happening any time with such depressed commodity prices, heap leaching or no heap leaching.


Cuts to come

The copper price tends to some extent to reflect the outlook for global growth, so this chart diving to $2.50/lb should tell us something about how global markets are viewing the road ahead.

Obviously resources companies are taking an overdue hit to their valuations, after a run that was too good to be true.

Dollar-exposed industrials and financials have long been superior market sectors.

As for property investments - take great care, particularly in coal mining regions and resources towns - there are going to be more than a few burned fingers in 2015!

Futures markets are now pricing in two interest rats by the end of this calendar year.