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Co-founder & CEO of AllenWargent property buyers & WargentAdvisory (subscription market analysis for institutional clients).
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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.
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"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'.
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The basic idea was that if the property market and therefore banks were heading into trouble (as was so often being reported in the media) then this would quickly and surely show up in the market capitalisations of Australia's major banks, insurers, property developers, mortgage insurers, and estate agents.
13 key financials
I therefore selected a baker's dozen of the key market players and the plan was to track the respective market capitalisation of each through 2016 and beyond.
The index comprises the four major banks, being Commonwealth Bank (CBA), Westpac (WBC), ANZ (ANZ) and the National Australia Bank (NAB), and a number of other significant ASX listed lenders.
I also included three key players from the real estate space: developers Lend Lease (LLC), Mirvac (MGR), and the Dexus Property Group (DXS), which is more aligned with commercial, retail and industrial property interests.
And while it is a comparatively small beast with a market capitalisation of about $1.5 billion, there is furthermore a place for everyone's favourite shorting vehicle Genworth Mortgage Insurance (GMA), since it allegedly represents such a neat proxy for residential housing market risk.
The constituents thus include the following 13 companies, which collectively comprise about a third of the total value of the Australian Securities Exchange (ASX).
Absolute Bankers Index
In December 2015, I calculated the total balance of the index as being $482 billion.
Of course, me being me, I promptly forgot about the 'project' when some more interesting news days happened.
I recalculated the index yesterday up to July 2016, and found that the index was...erm, totally unchanged at $482 billion.
I think it's quite likely that there will be downward pressure on bank valuations given more stringent capital requirements.
But overall markets are pricing no more risk than they were seven months ago.
Genworth special dividend
Genworth (GMA) released its 1H16 results this morning, including the declaration of a special dividend of 12.5 cents (on top of the ordinary dividend of 14.5 cents).
Mortgage delinquency rates remain very low in New South Wales (0.30 per cent) and Victoria (0.37 per cent). but have increased over the past year in Western Australia (0.62 per cent).
Delinquency rates in Queensland have been somewhat elevated since the 2011 floods.
The share price is up from a 52-week low of $2.12 to $3.10.