Updated: Feb 12, 2021
On Tuesday we held our first online conference, we started off with Baggot Investments Co-founder Peter Brown. Here is my quick snapshot of Peter’s insights: Peter had a (slightly) more positive outlook (on some fronts!) than his first talk in April.
Bad but not terrible forecast: He believes that we are looking more at a recession than a depression. However, he predicts prolonged unemployment levels of up to 20% for up to 5 years.
Buyer’s market: While he said it is still too early to say for certain, he believes it has changed from a sellers to a buyer’s market. He said that he would expect to see a big discount from market price two months ago. ‘I would bite the hand off someone offering the same as a price of a property listed two months ago.’ Rental is an issue, there’ll be a lot of vacant airbnb properties, there’s 20k migrant workers in pubs and restaurant businesses, of whom a significant proportion have gone home. If the market goes down say 20%, will it make financial sense for developers to go ahead with developments?
Social housing as an investment opportunity: Peter sees more opportunity in social housing for it’s long term consistent stable income return and for someone who might be used to being a deposit holder or if you are looking for a crica 5% return but are nervous of the markets.
Commercial property dangers: It seemed (to me anyway!) that for a while commercial property was like a money printing press but it seems some such as Peter are predicting a shuddering halt to this printing press. Companies like Twitter offer employees the opportunity to work from home so perhaps less space is needed and Peter believes overall with job losses and a slower economy that there will be a lot of vacant properties. Marie Hunt had an alternative perspective on this, more details to come soon on this.
Banks: Peter believes that they are safe and deposits are safe but the banks could be nationalised and thus believes to avoid bank shares (I don’t know why anyone would consider them in any case but i suppose that’s just my experience of seeing what i invested in them being almost wiped out completely). He believes 0% interest rates and their unfortunately likely upcoming high debtor defaults will not bode well for them.
High inflation worries: He believes high inflation may be a worry in the future and thus the value of money on deposit at rock bottom interest rates will be significantly eroded
Be Careful: Cheap stock purchases in the last couple of months does not turn one into Warren Buffett or George Soros, there could be a deep correction, be very careful, a false sense of bravado is a risk.
Time to re-balance? Peter and his colleagues at Baggot Investment Partners don’t like the standard MSCI index. Pensions connected to this are sold to a significant number of Irish investors and pension holders. The standard portfolio consists of Western European bonds that are negative yielding, this in addition to the fact that you are charged a management fee as well. The other main component is US S+P stocks. While the US stocks are doing well, the US S + P looks very expensive and he thinks there might be some worries when the dust settles in the market. Now could be a time to rebalance out of that standard portfolio.
Tech challenge: Peter recommended one potential concern around tech stocks would be that Trump may impose high taxation on them. He is going to need the money, and for Trump taxing tech companies would be very popular this side of the election.
Emerging markets - He believes that there are some opportunities to find value in emerging markets but to be careful as not all emerging markets offer value. He cited the decent rate of return of 6% with Mexican bonds. The dollar is always a concern with emerging markets as they have a lot of debt in dollar and must pay back in dollar but believes that dollar will continue to decrease in value and thus make these emerging markets debt cheaper.
As always, I am NOT an expert, the above are not recommendations and please do your own research.