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.

Friday, 27 February 2015

All about that base...(no trouble?)

Rates to fall to 1.75 percent?

So say futures markets.

With March cash rate futures contracts trading at 97,875 this indicates a likelihood of a cut as soon as March 3 to an official cash rate of 2 percent being priced as a 56 percent chance at the close yesterday.

With the iron ore spot price resuming its downtrend after Chinese New Year, these odds could sneak higher.

Implied yields on December 2015 contracts have sunk incredibly low at just 1.715 percent, suggesting that the market believes we will see two more 25bps rate cuts by the end of this calendar year. 

The case for cuts

The case for further cuts is clear enough (see links for my more detailed analysis of each factor):

-trend employment growing, but not as fast as the size of the labour force, and thus unemployment is rising;

-an alarming increase in regional unemployment in certain areas;

-headline inflation of only 1.7 percent, with the preferred underlying readings averaging 2.25 percent, being in the lower half of the 2-3 percent target range;

-capex expected to decline sharply over the year ahead;

-GDP growth forecast to remain below trend for some time;

-a dramatic correction in the Commodities Index, particularly in bulk markets; and

-some other stuff.

And the case for keeping rates on hold?

Arguments mainly seemed to be based around:

-keeping some dry powder in case of future emergencies;

-lower interest rates may not have much positive impact on sentiment; and

-lower interest rates could cause house prices in Sydney to boom.

The Wrap

The March decision may hang in the balance, but markets see further cuts this year as being very likely.