With close to two billion dollars in Assets under management, Bawdens Director Barry Cawthorn keeps a close eye on what drives prices up or down.
In the first of a two-part series we discuss the contents of a recent catch up interview with Barry.
Industrial Property News asked Barry what advice would he provide an investor when thinking about making investments decisions today acknowledging presently elevated asset prices against a backdrop of nagging fear about inflation.
He noted “The unprecedented rally in asset prices reflects the huge amount of monetary stimulus being brought into the global economy and how this activity has allowed central banks to set and keep rates low.”
Asked why the idea of inflation appears to be concerning.
“Investors have a nagging fear of rising inflation which also increases interest rates. Increased interest rates mean prices of assets fall. So far, investors are treating recent price rises as temporary and so prices might ease back.
Investors also seem to remain assured the worlds major central banks are in no hurry to reduce their stimulatory fiscal and monetary policies.”
Did he think Asset prices had crossed into bubble territory?
“That idea makes life tough for investors because inflation and its impact on interest rates represents a real unknown at the moment. So the debate about whether the present outbreak of inflation is permanent or not is critical for an investor. So I believe there is a lot riding on the answer, since higher inflation would doubtless lead to higher interest rates and lower asset values.”
However, Barry acknowledged the circular nature of the problem in saying.
“In my view it is impossible to know the answer- and so you have a present moment where it is important but not knowable.”
He noted however “Even though we have a moment today when something is important but not knowable, I do consider the price of most things relative to each other to be fair citing for example Australian 10 year bonds approximately 1.15% and prime property yields at 3.5-4.0% still.”
In the next issue of Industrial Property News, we discuss what investors can do to withstand a more inflationary environment.