Coming Soon! Australian Wealth Gameplan
Today your editor is hunkered down trying to complete the first edition of Australian Wealth Gameplan before we head off on a few days break to Hobart.
The official launch is scheduled for the week after next. I’ve already picked six Australian income stocks that you can either add to your portfolio or start from scratch.
So, stay tuned and look out for more details on Australian Wealth Gameplan in the coming weeks.
ANZ Takes Lambs to the Slaughter
We nearly fell off the chair when we read this headline:
The fact that ANZ had previously sold $2.5 billion worth of stock to institutional investors is not surprising. Those institutions after all are spending ‘other people’s money’ (OPM).
But that “small investors” – 178,000 people apparently – should voluntarily hand over $14.40 per share of their own money is, frankly, worrying, but more on that in a moment…
In a nutshell, that’s the power of the mainstream press. If all you’ve read over the last year is parroted editorial on the strength of the Australian banking system then you’re bound to feel confident to invest your money.
And if you also read that the government shouldn’t and never will allow an Australian bank to go under, then you’ll feel even more confident.
A perfect example of the nonsense most people are subjected to from the mainstream press can be found in Michael Pascoe’s article for Yahoo! Finance – “Plenty of pay packets for spending.”
He writes:
“In reality, despite all the headlines about job losses and unemployment rising, the employment side of the equation is doing incredibly well considering that the world is suffering a very serious recession and we’re having (a so-far mild) one ourselves.”
He goes on to say:
“There are pluses and minuses about the changes in employment over the year – there are more part-time and fewer full-time jobs, for example, and the number of jobs in the private sector has fallen by roughly 100,000 while public-sector jobs have increased by 150,000.”
Got that? Private sector employment – you know, the part of the economy where things are made or services provided – has dropped by 100,000, which public sector jobs – you know, the part of the economy that leaches taxpayer money without providing anything of any productive value – has increased by 150,000.
Just when the economy is already faltering, the public sector decides to up the bill. In other words there are 100,000 fewer taxpayers to pay the wages of 150,000 new public sector zombies.
According to Pascoe that’s great news.
So it’s hardly surprising that so many ANZ Bank investors chose to buy more shares at a “discount” to the current price if that’s the kind of message the majority of the population are reading.
But perhaps the biggest clue about the weakness of the ANZ Bank and other Australian banks is that they were more than happy to suck in every last dollar from investors.
ANZ Bank was only looking to raise $350 million from small investors, yet when applications for $2.2 billion of stock came in how could they possibly refuse to accept it?
They couldn’t.
Like a drunken bum, ANZ Bank couldn’t bring itself to refuse another drink.
Pity the sensible ANZ Bank investor who decided not to hand over more cash. With all these extra shares being issued chances are their dividend will be cut even further.
Actually we won’t pity them too much, we see very little reason why anyone would want to own bank shares in the first place.
But for the bank it’s nothing less than a windfall. That’s $2.2 billion of hard cash going straight to the balance sheet, and it’s money the bank can immediately use to prop up the housing market a bit longer.
We continue to say, sell the banks, and buy… (almost) anything else!
Other Stuff on the Markets
The S&P/ASX200 fell 0.12% yesterday, while there was marginally better news overnight on Wall Street with the Dow Jones Industrial Average adding 4.76 points. In Europe the FTSE100 gained 0.45% and the CAC40 added 0.54%.
The price of gold in Australian dollars is trading at $1,164.97, while in US Dollars it trading at $914.06.
The Aussie dollar strengthened slightly versus the US dollar and Japanese Yen, trading at USD$0.7846, and JPY72.79.
Further strength for Crude oil overnight, closing at USD$60.74.
For the biggest movers on the market yesterday click here…
Cheers.
Kris.
{ 5 comments… read them below or add one }
I beg to differ, you had to be a complete moron not to have bought your full $15,000 of ANz shares in the SPP. What sort of a fool doesn’t want to buy $16,500 worth of ANZ shares for $15,000?
You only have to wait less than 2 weeks to sell the shares and make an annualised return of 260%!
Those ANZ retail shareholders were pretty stupid weren’t they? Just like the CBA shareholders, MQG shareholders , AXA shareholders…..etc etc etc.
You know you can still stick to your message without being blindingly obtuse.
is it too late to put down the 15 thou ?????????????????????
& then cash it in for 16.5 thou
whers the form to sign ?
who do i ring??
Well, it is not that simple. Australia has always imported capital due to our expanding economy and low rate of savings and typically 1/3 to 1/2 of the bank funding requirements was overseas borrowing. The crisis reduced an amount of money the banks were able to borrow thus creating a credit rationing. In fact, the banks are slaughtering the economy as solid businesses cannot borrow, even for operational cashflow as credit departments do not sign anything. Under those circumstances the ANZ’s wish to get funds from the public is prudent and should be supported provided that they lend money here rather than speculate on overseas markets.
The ANZ Grindlays debacle should have been a sobering but yet the board rolls out a Brit hanging onto colonial delusions and trying to buy up assets his former employer couldn’t make work. Seedy Brits in crumpled suits hanging out in Hong Kong and the middle east are now seen as decrepit by more vibrant new local generations.
We also have NAB revisiting past failures in blighty and seeking to burn as much capital as Pearl did for AMP.
Our editor needs to give us a report on Hobart as your contributor is thinking he needs a few days respite there too!
To claim that public sector jobs are “…the part of the economy that leaches taxpayer money without providing anything of any productive value” is just silly dogma. How well would our economy function without education, health-care, roads, a legal system, a defense force, etc?
There is an extremist ideological point of view that says private enterprise is always better than public enterprise, but it doesn’t stand up to rational scrutiny. Certainly there are many situations where the government should get out of the way and let the free market create wealth, but its not a panacea and its not without its own corruptions and inadequacies. After all, the free market is made of the same fallible humans as the public service.
If the free market is such a superior system in all circumstances, then why is the internal structure of all the most successful corporations more akin to communism than capitalism? Corporations are a set of collectives (divisions) run by a committee (the board). There is no internal “invisible hand” or survival of the fittest (unless fittest means most inter-personally politically adept). If capitalism was the pinnacle of efficiency and creativity in all circumstances then corporations and employees would always be out-competed by individual private contractors forming strategic alliances.