# NAB & ANZ now "dogs with fleas"!



## MoneyNeverSleeps (28 July 2008)

Professional investors that I know dumped their NAB and ANZ stock months ago whilst another acquaintance closed his term deposits as soon as the NAB announced it's sub prime exposure last week; which was previously talked down to the point of being inconsequential!

Today Wayne Swann called a press conference to say that both banks were safe...... last time a treasurer did that was here in Victoria with Pyramid; not long after the press conference Pyramid collapsed and depositors and share holders lost nearly everything.

The problem is that if NAB and/or ANZ collapse, after all the sub-prime crises according to numerous US experts going to get a lot worse before it gets better, these investors and depositors will lose a lot and blame everyone except themselves! Indirectly the economy then suffers further as many of these people then draw on social security and and/or spend a lot less.

WHY THE HELL DO PEOPLE CONTINUE TO HOLD STOCK IN COMPANIES WHEN THEY CLEARLY HAVE PROBLEMS WHICH THEY HAD PREVIOUSLY ALMOST DENIED?

AND WHY WOULD ANYONE LEAVE MONEY IN A BANK WHICH HAS MAJOR PROBLEMS AND WHICH MAY CLEARLY BECOME WORSE?

IF YOU'RE ONE OF THESE PEOPLE, PLEASE, I IMPLORE YOU, HAVE A GOOD LONG THINK ABOUT WHAT A REASONABLE PERSON SHOULD DO? SURELY YOU DON'T BELIEVE THAT THE GOVERNMENT WILL GUARANTEE YOUR LOSSES!

If a few incompetent companies are subsequently removed from the corporate gene pool, all the better!

Gekko would be calling ANZ and NAB more than dogs with fleas, he'd be looking for a throat or two to rip out!


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## brettc4 (28 July 2008)

This appears a little over the top.

I do not deny that there are some issues. ANZ has now made provisions for about 2 billion in bad debts, but are still making billions in profit.  This is different from the US where a number of the banks are recorded losses, out big 4 will still make a billion plus per half.

I wont preach they are out of the woods, but I cannot see them going under. Maybe my imagination isn't good enough but time will tell.


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## michael_selway (28 July 2008)

MoneyNeverSleeps said:


> Professional investors that I know dumped their NAB and ANZ stock months ago whilst another acquaintance closed his term deposits as soon as the NAB announced it's sub prime exposure last week; which was previously talked down to the point of being inconsequential!
> 
> Today Wayne Swann called a press conference to say that both banks were safe...... last time a treasurer did that was here in Victoria with Pyramid; not long after the press conference Pyramid collapsed and depositors and share holders lost nearly everything.
> 
> ...




Hm i doubt that the four Australian major banks would go under even in these tough times, maybe just a drop in profit for the next few years, thats all. Plus Rudd could bail them out like the US have, except that the Australian Government has alot more cash (budget surplus) 

*ANZ - Earnings and Dividends Forecast (cents per share) 
2007 2008 2009 2010 
EPS 204.8 193.6 212.8 223.9 
DPS 136.0 136.0 144.0 151.5 *

*NAB - Earnings and Dividends Forecast (cents per share) 
2007 2008 2009 2010 
EPS 268.4 288.6 301.3 320.3 
DPS 182.0 196.0 206.0 222.0 *

*WBC - Earnings and Dividends Forecast (cents per share) 
2007 2008 2009 2010 
EPS 185.3 199.9 210.0 222.8 
DPS 131.0 142.3 148.5 158.0 *

*CBA - Earnings and Dividends Forecast (cents per share) 
2007 2008 2009 2010 
EPS 339.7 359.5 375.7 399.0 
DPS 256.0 269.0 280.5 297.0 *



> Date: 28/7/2008
> Author: Eric Johnston
> Source: The Australian Financial Review --- Page: 51
> The ANZ Bank may shortly announce $A200 million in write-downs. However, thereis speculation that the bank, which has been exposed to losses from ABC LearningCentres, Centro and Opes Prime, could opt to take "aggressive" actionwith regard to its exposure to complex credit protection instruments. Suchaction could potentially push the bank's write-downs to $A1 billion. InFebruary 2008, the ANZ announced a provision of $A226 million. Furtherwrite-downs may cause investors to believe that the global credit woes are finally having an impact in Australia. Meanwhile, the NAB, which on 25 Julyannounced it would have to make $A1 billion in provisions, has suffered itsworst one-day share price fall since the stock market crash of 1987
> ...




http://business.smh.com.au/business/its-not-over-yet-20080728-3m21.html

thx

MS


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## MoneyNeverSleeps (28 July 2008)

FACTS:

1. Should a professional investor/depositor rely on the government covering their losses as part of their investment plan? Talk to a pyramid investor/depositor about this.

2. By many accounts the sub prime crises is potentially only about US$500B into losses of perhaps US$1.5T.

3. Both NAB and ANZ had previously denied exposure or any significant exposure until the last few days, what else are they yet to disclose?

In my investment plan 1 + 2 + 3 =  and NOT


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## white_goodman (28 July 2008)

they should be buying into Anacot steel or Bluestar lol

the 2 Pillars of banking doesnt quite have the same ring to it....


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## wayneL (28 July 2008)

Both have seriously underperformed the xjo in the last two to five years and are below their prices of two yaers ago...

..in a time when they should have been kicking serious butt (even if somewhat illusory).

Yep, definite flea infestation there.


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## bassmanpete (28 July 2008)

I'm with you, MoneyNeverSleeps. For years the big 4 banks have been working together as a virtual monopoly ripping off the Australian public. Now two of them (for now) have admitted stuffing up. What's their solution? Raise interest rates!

So what they're saying is "We made a balls up, but we're not going to pay, our shareholders aren't going to pay (if we can help it), YOU'RE going to pay - because we know that you may whinge & complain but you won't DO anything about it."

I know from experience with banks that if you stand up to them & say "I'm not paying this fee", you can get away with not paying that fee! And if the branch that you're with insists that you pay the fee - go to another bank. In fact, go to another branch of the same bank. They'll try to fob you off with "It's the bank's policy" but if you insist you'll get away with not paying, because they know that the vast majority of people will just pay up without a murmur and that giving in to the insistent few means bugger all to their bottom line. Do it guys, the money's better in your pocket than in theirs!!!


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## Wysiwyg (28 July 2008)

136 c.p.s. fully franked dividend is 8.5% at $16.00 per share.Getting a good shake (what isn`t) at the moment so could get an even better low down the track.God bless America.


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## wayneL (28 July 2008)

Wysiwyg said:


> 136 c.p.s. fully franked dividend is 8.5% at $16.00 per share.Getting a good shake (what isn`t) at the moment so could get an even better low down the track.God bless America.



Grossed up, that makes a nice dividend.

Can they maintain that div without dipping into reserves though, that is the question.


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## GreatPig (28 July 2008)

Wysiwyg said:


> 136 c.p.s. fully franked dividend is 8.5% at $16.00 per share.



But the first 62 cents of that was paid at $29+, with the price dropping $1.38 when it went ex-div. It's dropped around $14 since then.

That leaves 74 cents as the final dividend (if they can still manage it). Not such a great dividend if it drops another $1.50 when that goes ex-div.

GP


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## Wysiwyg (28 July 2008)

GreatPig said:


> But the first 62 cents of that was paid at $29+, with the price dropping $1.38 when it went ex-div. It's dropped around $14 since then.
> 
> That leaves 74 cents as the final dividend (if they can still manage it). Not such a great dividend if it drops another $1.50 when that goes ex-div.
> 
> GP




Yes pig the interim has gone with the Dec. left this calender year.It does pay to sell around the top and buy around the lows doesn`t it.I`ll remember next time.


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## gfresh (29 July 2008)

> For years the big 4 banks have been working together as a virtual monopoly ripping off the Australian public. Now two of them (for now) have admitted stuffing up. What's their solution? Raise interest rates!




Well we're a small population, it's no different to the airlines, utilities, phone companies and others, where it's a small number of local companies dealing with a (relatively) small customer base. It tends towards either an duopoly or oligopoly perfectly and I'm not sure there is any conspiracy here. It's just business under the "free" market we have been so led to believe is a great thing. 

While deregulation has actually bought more players / competitors onto the scene in the last decade, just as they were starting to get a good foothold, they're now getting squeezed big time. Unfortunately these smaller institutions are unable to borrow direct from the RBA like the bigger ones can, and have to go to expensive overseas funding sources. 

The cost of this is large, making them unable to access any cheaper forms of funding, and pass on lower costs to the consumer. This has effectively killed competition right now. Not good for the consumer, but it's the way the system goes towards under the current structure when times get tough. 

One possible solution I read was having a Fannie Mae/Mac style mortgage backer here in Oz, who provides finance funding to not just the big banks, but the smaller ones as well. An even playing field at the source, so that everybody is drawing off the same source of funding. It does actually seem like a reasonable idea in theory, unless of course you get major mortgage catastrophe (e.g. US)


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## MoneyNeverSleeps (30 July 2008)

Wait until the banks make public that Australia has a sub-prime problem no less dramatic than the US. All over Australia, in areas like Melton and Rowville in Melbourne, banks are considerably exposed. In recent years:

1. Most mortgages were for 90-110% of the value of the property.
2. Values having dropped 10-30% in outlying suburbs.

The banks, and possibly, government, must be colluding to keep this information out of the media. They are probably hoping to ride out the storm, however there is little hope this happening now. The problem is once the foreclosures start they will severely impact on property values of all outer suburb areas.

According to an OECD report about 2 years ago, property values were about 30% higher than they should be in Australia and so it looks like the market is about to correct this.


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## michael_selway (30 July 2008)

MoneyNeverSleeps said:


> Wait until the banks make public that Australia has a sub-prime problem no less dramatic than the US. All over Australia, in areas like Melton and Rowville in Melbourne, banks are considerably exposed. In recent years:
> 
> 1. Most mortgages were for 90-110% of the value of the property.
> 2. Values having dropped 10-30% in outlying suburbs.
> ...




Hm yes Australian houses price will drop and bank profits also, but its hard to say it will be a "disater". Australia has a trade and budget surplus (currently anyway), unlike the US. What are your thoughts on this?

thx

MS


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## brettc4 (30 July 2008)

Does the US has Mortgage Lenders Insurance?

If what I have read is correct, Australia has a very small % of low or no doc loans, around 1%, not the 15% in the US.

For all loans where the equity is less than 20%, you pay LMI to protect the bank.  So for the bank to loss out, the insurance companies would have to not be able o pay.  

Does the US has LMI?

Brett


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## MoneyNeverSleeps (30 July 2008)

michael_selway said:


> Australia has a trade and budget surplus (currently anyway), unlike the US.? MS




Australia runs a current account deficit of about AUD$2B per month on average, currently adding about AUD$25B per year to our gross foreign debt which is now over AUD$1T (Fraser left $20B, Keating $160B and Howard $600B) the budget surplus is peanuts by comparison.


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## gfresh (30 July 2008)

Our account deficit is -6.3 % x GDP (IMF World Economic Report, April 08 - page 67), making it one of the worst of all the advanced economies. Even the US as a share of GDP is better off at -5.3%. 

Yes, the US does have mortgage insurance, just that the insurers are in dire straights 

So, that's the US right, why should we care? Well unfortunately our banks use the same insurers, AMBAC (NYSE:ABK) , PMI (NYSEMI), Genworth (NYSE:GNW) to underwrite our local mortgages.. Pull their charts up to get a current market snapshot of the current state of their business. So in another 12 months, given a continuing US train-wreck, it's possible they will crumble.

If (still if, even I will admit) we suffer large-scale falls in property, higher unemployment, where do our banks fall back on to recover the value of mortgages when people default and are forced into bankruptcy? That's your doomsday scenario.. remote, but possible.


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## MoneyNeverSleeps (30 July 2008)

brettc4 said:


> For all loans where the equity is less than 20%, you pay LMI to protect the bank.  So for the bank to loss out, the insurance companies would have to not be able to pay. Does the US has LMI?




I don't know (they must?) but there is still the question of how the banks get away without declaring their exposure regardless of who ends up footing the bill?


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## MoneyNeverSleeps (30 July 2008)

gfresh said:


> Our account deficit is 9.x % x GDP (IMF figures).. making it - one of the highest in the world  Even the US as a share of GDP is much better off.




In the medium to long run I never worry about the US, they control just about all technologies and industries worth controlling including IT and even space etc. How can they lose?

Australia it appears, thanks to Fraser, Hawke, Keating and Howard has quarries........we're simply copying Nauru and look where they ended up.


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## OK2 (30 July 2008)

MoneyNeverSleeps said:


> Wait until the banks make public that Australia has a sub-prime problem no less dramatic than the US. All over Australia, in areas like Melton and Rowville in Melbourne, banks are considerably exposed. In recent years:
> 
> 1. Most mortgages were for 90-110% of the value of the property.
> 2. Values having dropped 10-30% in outlying suburbs.
> ...




You are not for real comparing Rowville with Melton are you, did you do any research on the two suburbs? Prices in Rowville are up almost 10% in the previous quarter with the opening of Eastlink and good properties (not cheap properties) are selling within a week. Have a look at the last Census and I recall the majority of residents been self-employed in Rowville with most of them in the trades industry and almost half the homes in Rowville having no mortgage. I can vouch that most of the toffee nose mothers that I have to fight with for a parking space before and after school each day are driving European tractors with all of the options.

Please stick to losing your money with shares if you are not able to get your property markets right!!!


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## gfresh (30 July 2008)

moneyneversleeps said:
			
		

> In the medium to long run I never worry about the US, they control just about all technologies and industries worth controlling including IT and even space etc. How can they lose?




Just to note I removed that quote whilst I was checking it, the correct figure I was looking at was the account deficit as percentage of GDP which is -6.3%. This is only behind Spain, Portugal, Greece, New Zealand, Iceland, and Cyprus.

Seeing as I'm hogging another post, our mortgage debt as a % of GDP is very large, meaning any downturn *could* have as large effect on our major banks as any of those areas that starting to have large problems (US, UK, Spain, Ireland)


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## michael_selway (30 July 2008)

MoneyNeverSleeps said:


> Australia runs a current account deficit of about AUD$2B per month on average, currently adding about AUD$25B per year to our gross foreign debt which is now over AUD$1T (Fraser left $20B, Keating $160B and Howard $600B) the budget surplus is peanuts by comparison.




Hm i thought it said it went into surplus in Apr08?

http://news.smh.com.au/business/trade-surplus-plummets-after-6-year-high-20080703-30zz.html
http://www.abc.net.au/lateline/business/items/200807/s2293999.htm
http://www.abc.net.au/reslib/200807/r268277_1124456.asx

thx

MS


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## Nicks (31 July 2008)

brettc4 said:


> Does the US has Mortgage Lenders Insurance?
> 
> If what I have read is correct, Australia has a very small % of low or no doc loans, around 1%, not the 15% in the US.
> 
> ...




Brett is 100% on the money here.

If you see the housing market in Australia as a problem (like I and many others do) it is in for a correction, it is not the banks you should be offloading, it is the insurance companies.

Any loans by the big 4 in Australia that are more than 80% of the property value require mortgage insurance.

So for the very small minority of loans that are less than 80% of the value of the property, then the housing market would need to drop more than 20% AND the owner unable to pay the mortgage for the banks to stand to lose any money.

Unfortunately our banks got greedy and half the execs should be sacked imo. They played it very safe in their own backyard, and ensured in a reasonably economically sound Asutralia that all their bases were coverd........ and then went out and poured billions into the US Sub Pribe junk mortgage market. Morons if you ask me.

Anyway I hold ANZ (since 2004) and its now 2008 and I am making a capital loss. That being said, given my reasoning above regarding the Mortgage Insurance, and the fact that the SP has factored in the recent news and probably severely over reacted, the SP makes compelling buying at this price and return. Australian banks are a very profitable business, very sound and even more so now that they have learnt some harsh lessons after being complacent.

Running out and taking your money out of the Big 4, doing a run on the banks, is probably unwarranted. What would Bud Fox do - take it out of NAB and put in in ANZ? lol. Better yet, hide it under the bed! Its safer there than in the bank.


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## gfresh (31 July 2008)

Our banks are safe right now, but the environment could be different in 12-18 months if things kept going south. Who knows there whether it will or it won't, so it's a bit premature to speculate right now.

Here are the latest housing lending figures from APRA, September 2006, but probably as accurate as you're going to find as it's taken from the banks themselves... Worth a read. 

http://www.apra.gov.au/Insight/upload/ADI-housing-lending.pdf

As Nick stated, LMI is very high for LVR's above 80%, but I'm surprising it's not quite 100% LMI insured (chart 1). 85-90LVR for instance is about 92% insured .. There are some gaps. 

LVR amongst "first time borrowers" (chart 2) is stacked towards much higher LVR's than 80%, however on the positive side this only makes up 10% of total loans made. Of course, newer borrowers are more recent purchasers, and would suffer most with a fall in values. 

If we look at the LVR's total value (chart 3), while it's true 75-80% are the majority in the chart below.. If we sum 80->100% LVR, it comes to approximately 22%, not insignificant if those are the ones more at risk.


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## Muschu (31 July 2008)

Nicks said:


> Brett is 100% on the money here.
> 
> If you see the housing market in Australia as a problem (like I and many others do) it is in for a correction, it is not the banks you should be offloading, it is the insurance companies.
> 
> Any loans by the big 4 in Australia that are more than 80% of the property value require mortgage insurance.....




Interesting comment Nick - thanks.  Any observations on what % of the business of an insurance company, like QBE for instance, is in this particular aspect of insurance?


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## dhukka (1 August 2008)

Nicks said:


> Anyway I hold ANZ (since 2004) and its now 2008 and I am making a capital loss. That being said, given my reasoning above regarding the Mortgage Insurance, and the fact that the SP has factored in the recent news and probably severely over reacted, the SP makes compelling buying at this price and return. Australian banks are a very profitable business, very sound and even more so now that they have learnt some harsh lessons after being complacent.
> 
> Running out and taking your money out of the Big 4, doing a run on the banks, is probably unwarranted. What would Bud Fox do - take it out of NAB and put in in ANZ? lol. Better yet, hide it under the bed! Its safer there than in the bank.




I fear you're making the same mistake with ANZ as you did with BBI. Getting emotionally attached to the stocks you own is never a good idea. We have just seen a series of events play out with US banks and investment banks where they:

denied there was any problems. Then they addmitted problems but that they were one offs, writedowns were taken, denied capital raisings and dividend cuts were needed. Then more writedowns came, CEO's sacked, capital raisings, dividend cuts. More writedowns, more capital raisings, more dividend cuts and in some cases eliminated altogether, government bailouts and bankrupticies. 

Where are we at in Australia? Taken some writedowns, a CEO was dismissed yesterday. Does anyone honestly believe the Australian banking and financial sector is not in for a lot more pain in the months and years ahead? Anyone notice SUN's little announcement today? A tripling of bad debts hmmm.

The above is not meant to indicate that we will follow the US exactly with the government stepping in to bail out large Australian financial institutions anytime soon. However if investors should have learned anything in the last 12 months it would be that you cannot believe anything that management tell you. ANZ yielding more than 8% looks great but can that dividend be relied upon? 

Here's a predicition, ANZ will be closer to $10 than $15 before all the bad news is out there and I wouldn't be surprised to see it in single digits. NAB won't be much higher with the amount of crap they have yet to mark to market. Dividend cuts and capital raisings are all very much on the table.


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## Julia (1 August 2008)

Dhukka, I was about to make very similar remarks.  Thanks for doing it much better than I would have.

Nicks, instead of your current strategy, did you at any stage while ANZ started to fall, consider preserving your capital, and simply standing aside until the bad news is all out there and some confidence returning is reflected in the SP?

If not, can you say why not?
(This is not necessarily a criticism of your approach, but I'm just interested to know why people make the decisions they do, especially with a stock which is falling through the floor like ANZ.)

If I recall correctly you finally sold out of GTP.   Can you say what it was that finally allowed you to make that decision?  (Bet you're glad now, huh!)


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## Nicks (2 August 2008)

Dhukka (and Julia) - thanks for your fears but you need not worry. The reason I continue to hold a small amount of ANZ shares is for the same reason I bought them to start with - to get a discount on my Margin Loan. Nothing else really. Not emotional love.

Like everyone here I am disappointed with the banks disclosure on the US writedowns (not just the lack of, but what seems to me to have been misleading or simply lies). I cant see how they can justify this and perhaps there is grounds for a class action.

I sold my other Big 4 holding - WBC - at $26.50 for a capital profit about 6 months ago when the credit crunch was becoming more obvious. Dhukka after you bagged BBI - it went up! and I sold for a profit (no love lost lol). So perhaps it was you whom made the mistake in not reading the market correctly? (Julia I sold GTP for a capital profit, not as big as I would have liked though. Do you hold any banks Julia?).

The thing is Dhukka - I guess you would have told someone not to buy BBI at 60c, given your opinion of this stock? Now they are 90c. For a trader this would have been a killing. I guess what I am trying to say is that anyone can say they were wise after the fact. Anyone can bag things after a situation or news develops and especially in a bear market. (BBI has no refinancing in the near future, perhaps why the SP is recovering strongly as 'panic and fear' is subsiding to more rational trading).

The thing to note is that the market is not always rational (especially in Bull / Bear / Dot com / Uranium / Credit Crunch markets) - despite you often having good fundamental observations. Sometimes a trader trades purely on technicals, market mood, sometimes over selling, sometimes reaction to some specific news, and sometimes on fundamentals. Best is a wholistic combination to calculate a trade. Perhaps why I made profit on BBI trades when it was all doom and gloom as far as you were concered.

Anyway back to the topic and less about me. ANZ is strongly pushing growth into Asia (yes they got greedy with US subprime). Is there anything other than the current news out that makes you think ANZ will hit $10? Do you think it is their domestic exposure or their US exposure that will cause this? Do you disagree that Australian banks are not profitable? Given that domestic housing price demand is still high and that the banks cover their asses significantly with LMI, I am not convinced that this will cause much of a contribution to domestic concerns. My 2c.


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## So_Cynical (2 August 2008)

MoneyNeverSleeps said:


> Wait until the banks make public that Australia has a sub-prime problem no less dramatic than the US. All over Australia, in areas like Melton and Rowville in Melbourne, banks are considerably exposed. In recent years:
> 
> 1. Most mortgages were for 90-110% of the value of the property.
> 2. Values having dropped 10-30% in outlying suburbs.
> ...




Has someone told "Robots" :dunno:


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## dhukka (2 August 2008)

Thanks for the response Nicks but you need to be more careful in your representation of the course of events. 



Nicks said:


> I sold my other Big 4 holding - WBC - at $26.50 for a capital profit about 6 months ago when the credit crunch was becoming more obvious. Dhukka after you bagged BBI - it went up! and I sold for a profit (no love lost lol). So perhaps it was you whom made the mistake in not reading the market correctly?
> 
> The thing is Dhukka - I guess you would have told someone not to buy BBI at 60c, given your opinion of this stock? Now they are 90c. For a trader this would have been a killing. I guess what I am trying to say is that anyone can say they were wise after the fact. Anyone can bag things after a situation or news develops and especially in a bear market. (BBI has no refinancing in the near future, perhaps why the SP is recovering strongly as 'panic and fear' is subsiding to more rational trading).




I wasn't trying to 'read the market.' I'm not surprised at all that BBI bounced along with the rest of the market with the April rally. My comments addressed the fundamentals of the business which were and continue to remain poor. The only reason I did that was because you had a false idea of the leverage of the business. I was trying to point out that the business is highly leveraged can barely cover it's interest payments nor can it continue it's payout ratio. 

If readers care to go back and look at the BBI thread it's clear that you were recommending the stock based on the alleged solid fundamentals of the business and never referred to it as a trading opportunity, although you did mention it being oversold in March. Nevertheless, on February 4th you wrote: 



Nicks said:


> I hold TCL and believe a stock like this is essential stabiliser in your portfolio. For the reasons already mentioned, it is a solid cash earner - people will always drive. It shouldn't be too affected by the credit markets as they easily get finance due to the fact that they have very low risk steady income.
> Excellent stock to be in at the moment and at this price its very attractive and brings a very nice yield alone (plus scope for capital growth up to and above $8 not only because it has in the past but for these same very fundamental reasons).
> *BBI* is another that I categoirise in this basket with more or less the same explanation at the moment..... though slightly more complex it is returning a very nice yield.
> Plus, both have potential for 30-40% even 50% capital gains potential to previous prices if the market goes up.
> These 2 for a balanced, steady and yield earning portfolio are a good position to hold imo.




BBI price at the time *$1.35*, price now *$0.875* 

Anyway, if you made money on BBI trades (which of course you can claim you did without any proof) then good luck to you. Clearly from the BBI thread you spent quite an amount of time analysing the fundamentals and were horribly wrong. Your success should be attributed to pure luck not good analysis.  



> The thing to note is that the market is not always rational (especially in Bull / Bear / Dot com / Uranium / Credit Crunch markets) - despite you often having good fundamental observations. Sometimes a trader trades purely on technicals, market mood, sometimes over selling, sometimes reaction to some specific news, and sometimes on fundamentals. Best is a wholistic combination to calculate a trade. Perhaps why I made profit on BBI trades when it was all doom and gloom as far as you were concered.




Thanks for pointing out the obvious. 



Nicks said:


> Anyway back to the topic and less about me. ANZ is strongly pushing growth into Asia (yes they got greedy with US subprime). Is there anything other than the current news out that makes you think ANZ will hit $10? .




Let's turn that question around Nicks because it really is one that you need to ask yourself. Do you really think the current news out is the last of problems you are going to hear from ANZ given what we know of repeated denials of damaging exposures, assurances that everything was OK and the course of events that has played out in the US with similar financial institutions?



Nicks said:


> Do you think it is their domestic exposure or their US exposure that will cause this?



 both



Nicks said:


> Do you disagree that Australian banks are not profitable?



 Yes I do disagree that they are not profitable. Clearly they are profitable - for now.



Nicks said:


> Given that domestic housing price demand is still high




Is it? With loan commitments down about 30% year over year?


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## ROE (2 August 2008)

Nicks said:


> Brett is 100% on the money here.
> 
> If you see the housing market in Australia as a problem (like I and many others do) it is in for a correction, it is not the banks you should be offloading, it is the insurance companies.




and the underwriter like monoline goes belly up like in the US
the bad debt fall back to the banks 

insurance can only write so much claim after that, they either increase
their premium or don't write risky insurance or goes belly up.

when there is a large claim, banks will have to take some of the heat.


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## Nicks (2 August 2008)

Dhukka - Sorry didnt read all your quotes. Hope you didnt spend too much time digging it all up. 

Like I said - "I guess what I am trying to say is that anyone can say they were wise after the fact." aka hindsight.

Good luck. I take it you have shorted ANZ to back up your view of $10 SP?


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## Nicks (2 August 2008)

ROE - the consumer pays the premium.

I agree about the underwriters. Not sure if thats a business i'd want to be investing in atm. I suppose they have factored that into their premiums now.


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## Julia (2 August 2008)

Nicks, thanks for your response.
In answer to your question:  no, I haven't held any of the banks for many months.  Went mostly to cash at the beginning of January (should have done it before then!) and now hold only FLX.  Will not be returning to the market until there is a clear return of sustained confidence, not some itsy bitsy short rally.


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## dhukka (2 August 2008)

Nicks said:


> Dhukka - Sorry didnt read all your quotes. Hope you didnt spend too much time digging it all up.




I understand, it is often difficult for people to relive their errors, although it can be good therapy. 



Nicks said:


> Like I said - "I guess what I am trying to say is that anyone can say they were wise after the fact." aka hindsight.




No hindsight needed. I have repeatedly warned over last year about the deteriorating economy and the vulnerability of financial and other highly leveraged stocks. It's all over this forum and my own blog. 



Nicks said:


> Good luck. I take it you have shorted ANZ to back up your view of $10 SP?




I don't short stocks, nor do I need to. Not holding dogs is a big enough reward.


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## Nicks (2 August 2008)

What stocks do you hold then Dhukka? And just to clarify, are you saying ANZ is a dog?


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## lioness (2 August 2008)

Nicks said:


> Dhukka (and Julia) - thanks for your fears but you need not worry. The reason I continue to hold a small amount of ANZ shares is for the same reason I bought them to start with - to get a discount on my Margin Loan. Nothing else really. Not emotional love.
> 
> Like everyone here I am disappointed with the banks disclosure on the US writedowns (not just the lack of, but what seems to me to have been misleading or simply lies). I cant see how they can justify this and perhaps there is grounds for a class action.
> 
> ...




Nicks, you are willing to hold ANZ and accept a capital loss in order to gain a discount on your margin loan. Gee, I wonder what your next great idea is??


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## Nicks (3 August 2008)

lioness - Yes, given the given the cost / benefit of it.


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## dhukka (3 August 2008)

Nicks said:


> What stocks do you hold then Dhukka? And just to clarify, are you saying ANZ is a dog?



 I own just 2 stocks, you can see what I hold on my blog and how they've done. I record what I do as I do it.  

ANZ is now back at prices that it was in 2001. Is that not a dog of a performance? I believe, maybe wrongly, that the headwinds facing ANZ and other financials over the next couple of years will mean that they will continue to have dog like performance for a while yet. 

Just to be clear, I'm sure you'll be able to point out in the coming months times when the stock rallies and you could have made profits by trading it and that I was wrong. However as an 'investor' that doesn't really interest me.


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## dhukka (3 August 2008)

Nicks said:


> Dhukka - Sorry didnt read all your quotes. Hope you didnt spend too much time digging it all up.




Interesting that I got 2 comments on my blog yesterday. I say interesting because I rarely get more than 1 per fortnight. However the author was fairly unoriginal leaving the exact same comment on both posts. Here is the direct quote:  



> All doom and gloom. I'll laugh at you when things pick up. Hey - according to you - the whole world will stop!!!! You dont know jack. I bet you wont even show this comment.




The comments are even more interesting given the course of this thread over the past 24 hours. So I can only conclude Nicks that 1) you did read all my quotes and 2) they were accurate enough to make you post childish remarks on my blog.


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## Nicks (3 August 2008)

dhukka said:


> I own just 2 stocks, you can see what I hold on my blog and how they've done. I record what I do as I do it.
> 
> ANZ is now back at prices that it was in 2001. Is that not a dog of a performance? I believe, maybe wrongly, that the headwinds facing ANZ and other financials over the next couple of years will mean that they will continue to have dog like performance for a while yet.
> 
> Just to be clear, I'm sure you'll be able to point out in the coming months times when the stock rallies and you could have made profits by trading it and that I was wrong. However as an 'investor' that doesn't really interest me.




Dhukka - you cant have it both ways. Now you are protecting yourself from comment if the stock does go up, but there will be an 'I told you so' if it goes down. Like how you enjoyed berrating me for BBI.

I dont think it matters either way whether you are an investor, or a trader. As long as you succeed. This forum caters for all, investors, traders and more and being negative toward one strategy is narrow minded.

I dont criticise or ridicule people for their opinions (as you have done for me and others). Good luck with your 'investing' and i'll check out your blog when I have some time.


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## Muschu (3 August 2008)

Nicks said:


> .....I dont think it matters either way whether you are an investor, or a trader. As long as you succeed. This forum caters for all, investors, traders and more and being negative toward one strategy is narrow minded....




I have to agree that this forum surely intends to cater for investors of all types.  I see no issue with that whatsoever.  Most posters are very genuine in their comments and many have been very helpful to me.
What I find unpleasant are inferences, some of which are presented in quite a clouded fashion, that "my way is better than yours" or "why didn't you do [or why aren't you doing] what I did?" 
And isn't it OK to admit failure as well as success?  If trading was that easy I guess we'd all be living ridiculously exhorbitant lifestyles -- or, better still, be in a position to support people in real need.
Just my thoughts.
Best wishes
Rick


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## Nicks (3 August 2008)

Well put Rick.

How are things going for you? the market has been hard since you started to become active.

Did you buy into any ANZ or NAB?


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## dhukka (3 August 2008)

Nicks said:


> Dhukka - you cant have it both ways. Now you are protecting yourself from comment if the stock does go up, but there will be an 'I told you so' if it goes down. Like how you enjoyed berrating me for BBI.
> 
> I dont think it matters either way whether you are an investor, or a trader. As long as you succeed. This forum caters for all, investors, traders and more and being negative toward one strategy is narrow minded.
> 
> I dont criticise or ridicule people for their opinions (as you have done for me and others). Good luck with your 'investing' and i'll check out your blog which I assuming is the one posted as your signature for all to see.




On the contrary. If ANZ has bottomed and therefore doesn't trade anywhere near $10 in the future how could I possibly protect myself from comment? I will have been dead wrong. 

My point is that, as with all bear markets you will have rallies of the short sharp kind where beaten down stocks can rise 10%+ in a day, or 25% in a month, that doesn't to me prove that a call about the medium term outlook for the stock is false.

I completely agree that it would be narrow minded to think people can only make money using one method. Obviously many poeple do make money trading stocks and good luck to them, I have no problem with that, I'm just not one of them. I stick to what I know and what works for me. Again though, your comments re: ANZ  did not seem to be calling for a trade. Your comments seem to fly in the face of current evidence that all the bad news is out there. If you take my challenges to your view of the world as over the top criticism then so be it.


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## Muschu (3 August 2008)

Nicks said:


> Well put Rick.
> 
> How are things going for you? the market has been hard since you started to become active.
> 
> Did you buy into any ANZ or NAB?




OK thanks Nick.  I have learned a lot, some of it a bit late, but I can cope. Some excellent professional suggestions helped.  Have moved far more into cash. [I'm retired].  Still have a handful of CBA.  Major holds are NVT, BHP, WOW, WPL, QBE.  All except the last are in front [today]  These are stocks I have had for between 1 and 5 years. Tomorrow who knows.  I also have small holds in LEI and WOR where I am down but comfortable with that.  Even among retirees,  approaches differ.  Imagine if we were all the same?


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## Nicks (6 August 2008)

1 August 2008:



dhukka said:


> Here's a predicition, ANZ will be closer to $10 than $15 before all the bad news is out there and I wouldn't be surprised to see it in single digits. NAB won't be much higher with the amount of crap they have yet to mark to market. Dividend cuts and capital raisings are all very much on the table.




ANZ Closing Price 1 August 2008: 16.17.

ANZ Current Share Price: http://www.asx.com.au/asx/markets/EquitySearchResults.jsp?method=get&template=F1001&ASXCodes=anz


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## dhukka (6 August 2008)

Nicks said:


> 1 August 2008:
> 
> 
> 
> ...




And your point is Nicks? I'm wrong because ANZ rallies for a few days? Puhlease, as noted above, short sharp clearing rallies are common in bear markets. We've seen this movie before, the worst is over and it's time to pile into financials. And then what happens? It turns out it wasn't. Eventually the bottom callers will be right of course but they've got a few more bottoms to call IMO.


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## Nicks (6 August 2008)

Don't get so defensive. There is no 'point', just thought it would be interesting to track.

Just out of curiosity though Dhukka - your call of ANZ @ $10 or single digits - what timeframe do you give that?


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## dhukka (6 August 2008)

Nicks said:


> Don't get so defensive. There is no 'point', just thought it would be interesting to track. Just out of curiosity though Dhukka - your call of ANZ @ $10 or single digits - what timeframe do you give that?




You're right, there is no point to your post. Anyone can track the share price every couple of days. So if there was a point to your post it was obviously because you thought you had some victory because the share price rose for a couple of days. Sad really. 

I don't do exact time frames because quite simply I can't. People like motorway attempt such things so I'll leave it to them, what I said was;



> Here's a predicition, ANZ will be closer to $10 than $15 before all the bad news is out there and I wouldn't be surprised to see it in single digits.




Bad news in the form of writedowns and reduced earnings expectations I expect to see for Aussie Banks for at least the next 12 months. When the market decides to discount these things I have no clue, it could be in 6, 12 or 18 months time.  That said, if ANZ has not traded below *$12.50* within the next 12 months I will be happy to admit to being wrong.


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## moXJO (6 August 2008)

I wonder how many people were scared into selling at the lows with all these type's of threads.


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## Nicks (6 August 2008)

Dhukka - As I said, no point other than to track the SP relative to your call...... didnt give a timeframe on it, asked you for that. The rest you extrapolated for yourself.

Keep up with the 'Puhlease' and 'Sad Really' negative language directed at me in your posts. It doesnt make me look like a goose. Courtesy and maturity have nothing to do with how smart you may be or think you may be. Anyway.... sticks and stones lol. Good luck and we'll see how ANZ goes.


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## AnDy62 (6 August 2008)

I think that for example NAB is trading higher than it was a few weeks ago despite that bad, bad news means that things are pretty much priced in, *at the moment.. *though I could still forsee lower prices if things detoriate further in credit markets


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## aacantona (7 August 2008)

Initial post is a horrendous overreaction - expect to see it move around no more or less than the index!


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## treefrog (21 August 2008)

NAB has broken the 8yr support level of $24 this morn on good volume - $20 looking good


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## treefrog (21 August 2008)

treefrog said:


> NAB has broken the 8yr support level of $24 this morn on good volume - $20 looking good




.....and ANZ still looking decidedly unwell but the $2.50 level should hold, maybe even the $8 level


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## Bushman (18 September 2008)

NAB is now trading at $18.50 odd!! That is now a historic yield of over 10%. 

Talk about factoring in the end of the world as we know it.


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## dhukka (23 January 2009)

dhukka said:


> Here's a predicition, ANZ will be closer to $10 than $15 before all the bad news is out there and I wouldn't be surprised to see it in single digits. NAB won't be much higher with the amount of crap they have yet to mark to market. Dividend cuts and capital raisings are all very much on the table.






Nicks said:


> Anyway back to the topic and less about me. ANZ is strongly pushing growth into Asia (yes they got greedy with US subprime). Is there anything other than the current news out that makes you think ANZ will hit $10? Do you think it is their domestic exposure or their US exposure that will cause this? Do you disagree that Australian banks are not profitable? Given that domestic housing price demand is still high and that the banks cover their asses significantly with LMI, I am not convinced that this will cause much of a contribution to domestic concerns. My 2c.






Nicks said:


> 1 August 2008:
> 
> 
> 
> ...




Well that didn't long, not even 6 months and ANZ is now trading closer $10 than $15, still holding Nicks?


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## Julia (23 January 2009)

dhukka said:


> Well that didn't long, not even 6 months and ANZ is now trading closer $10 than $15, still holding Nicks?



I've been waiting for this post, Dhukka.  

Nicks, do you think it has bottomed yet?


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## kengaikl (23 January 2009)

MoneyNeverSleeps said:


> Professional investors that I know dumped their NAB and ANZ stock months ago whilst another acquaintance closed his term deposits as soon as the NAB announced it's sub prime exposure last week; which was previously talked down to the point of being inconsequential!
> 
> Today Wayne Swann called a press conference to say that both banks were safe...... last time a treasurer did that was here in Victoria with Pyramid; not long after the press conference Pyramid collapsed and depositors and share holders lost nearly everything.
> 
> ...




I believe you are one of those people who have lost so much money that you are hoping that the entire market collapses because that's the only outcome that'll make you feel better. 

I don't think ANZ and NAB will go under nor do i believe they are worth while investing in at the moment as there is not much upside to banking shares. 

However if there is a bank that i believe will go under, it'll most likely be MQG.


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## CanOz (24 January 2009)

Julia said:


> I've been waiting for this post, Dhukka.
> 
> Nicks, do you think it has bottomed yet?




This calls for a chart!

I have a friend who has been asking when its a good time to buy the banks again......all i told him was "Not Yet!"

Cheers,


CanOz


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