MQG - Macquarie Group

[waz]

Re: MBL - Macquarie Bank

Hi Explod,

Just continueing from what your saying 'US markets are overpriced' do you have any facts to back this up.
Are you talking about any particular sector? And what measurement are you using.

Since we are in the MBL thread I assume we are talking about US investment banks. Just doing a quick search. Goldman Sachs is on a current PE of 8.75. Other banks are very similar.

Please elaborate more. ie. at what multiples are you expecting something to be overpriced, evenly priced, and underpriced.

personally, at current multiples (and assuming things dont get much worse) i think the us is fairly evenly priced. although the tech sector in general i find is overpriced. i cant justify a company such as yahoo sitting on a PE of 45+, (my reason being the risk isnt worth any possible gains above the risk free rate).

 

[explod]

Re: MBL - Macquarie Bank

Hi Explod,

Just continueing from what your saying 'US markets are overpriced' do you have any facts to back this up.
Are you talking about any particular sector? And what measurement are you using.

Since we are in the MBL thread I assume we are talking about US investment banks. Just doing a quick search. Goldman Sachs is on a current PE of 8.75. Other banks are very similar.

Please elaborate more. ie. at what multiples are you expecting something to be overpriced, evenly priced, and underpriced.

personally, at current multiples (and assuming things dont get much worse) i think the us is fairly evenly priced. although the tech sector in general i find is overpriced. i cant justify a company such as yahoo sitting on a PE of 45+, (my reason being the risk isnt worth any possible gains above the risk free rate).

Waz, a very good question. There is no simple answer. It is why I am a trend follower, but also make my own assessment on fundamentals before entering a trade.

The problem with P/E ratios is that they are based on forcasts for the industry for which a company may operate. This then means that in fact they can be based on an opinion. These forcasts got right out of hand leading up to the 1930's crash and I suggest this is the case now.

Another problem is the Index, the Dow has only a few selected blue chips the NYSE and NASDAQ have many and are more akin to our All Ords.

Another is debt, assets owned (so called) on margin are being counted as assets, when it is far from the case. Banks of course thrive on this movement of funds taking fees on the way through and interest all the while. Macquaries is feasting well on it. But what happens when liquidity begins to dry up, as now, the P/E ratios at the moment do not reflect that yet. So I have a problem with the outlook.

This issue is beyond me to outline properly, my knowledge is ample for my own purpose and in any case the area is subjective and others will have differrent political, social and economic views.

However for those wanting to see another side to Wall Street,and to dig into the answers raised, Robert R Precter Jnr.,s text "Conquer the Crash" John Wily & Sons 2002 is an excellent piece of education. Another "Financial Armageddon" Michael PANZER, Kaplan Publishing 2007 is excellent and will send a chill up your spine.

 

[explod]

Re: MBL - Macquarie Bank

Further to the last, just thought the following excerpt from "Conquer The Crash" which touches on P/E ratios may be of interest.

Precter, at Page 61. .......Standards & Poor's, has just bowed to pressure to change the basis of its earnings reports to "operating earnings" rather than total company earnings so that the reported P/E will henceforth be about half of what it really is. They have begun to tack these ratios onto the old ratio's eighty-year histor as if they are the same thing. Operating earnings omit several items, the main one being interest payments for debt service. HELLO! Debt service is what is killing industry! Leaving it out is like leaving torture equipment out of a description of a dungeon. The desperation within the financial world to avoid reporting "bad news" (i.e., the truth) is obviously immense.
How do so many public and prefessional investors justify holding such expensive stocks today? The latest issue of Money magazine (March 2002) quotes a manager at one of the largest stock mutual funds in the world: "You have to trust them. To some degree they become faith stocks." Money concurs, "Investors must rely as much on gut instinct as on objective analysis. Sometimes an extra large helping of hope is required." One could hardly utter a worse guide to life, much less to the assumption of financial risk. Those of us dedicated to objective financial analysis aren't always right. But those who rely on extra-large helpings of trust, faith, hope and "gut instinct" always regret it." end quote


And for your idea Mime that because a stock has behaved in a certain way in the past, it will do so again, is ok perhaps, but "gut instinct" is not for me

 

[Buffettology]

Re: MBL - Macquarie Bank

No doubt, we have to wait and see the Fed and RBA outcomes before buying in.

Could give us some great bargain hunting opportunities!

 

[vishalt]

Re: MBL - Macquarie Bank

I jumped in at $70, like I said the market is full of crap and MacQ is a fundmental powerhouse.

• It's not directly responsible for this hedge funds.
  
• Those hedge funds HAVE NOT collapsed (yet), they only stand to lose a portion of their money.
  
• Even if does collapse its barely going to dent the financial rolls royce.
  
• MacQ generates way too much money, and its management are really top people.
  
• It's P/E ratio is 12, cheap compared to a sector average of 15 and an AllOrds average of 17.
  
• Analysts still maintain their bullish forecasts, I think Goldman & Meryll still retained a $106 target.

 

[Ken]

Re: MBL - Macquarie Bank

I work at the NAB, and was speaking to a financial adviser and there were hedge funds not directly related to MBL, but they had lost 80% of their value due to the fact they were heavily geared.

Dont know much about hedge funds, but it sounded nasty.

No offence if anyone lives in Toorak in Melbourne, but I hope it was your funds seeings as your houses price have gone up 700k in the last 3 months.

 

[theasxgorilla]

Re: MBL - Macquarie Bank

Further to the last, just thought the following excerpt from "Conquer The Crash" which touches on P/E ratios may be of interest.

Precter, at Page 61.

From Wikipedia on Prechter & EWI:

"In July 2007, the Hulbert Financial Digest, published by Dow Jones, reported that Elliott Wave International's Elliott Wave Financial Forecast had a 15-year annualized return of negative 25.4%/year and a return of negative 17.8% over the life of the newsletter."

Unfortunately, in light of the last 5 years of economic, share market, and property boom activity it looks a lot like Prechters book isn't worth the paper it's printed on. A slightly different slant on the old saying it's not time-in the market, but timing the market that counts.

 

[Awesomandy]

Re: MBL - Macquarie Bank

• It's not directly responsible for this hedge funds.
  
• Those hedge funds HAVE NOT collapsed (yet), they only stand to lose a portion of their money.
  
• Even if does collapse its barely going to dent the financial rolls royce.
  
• MacQ generates way too much money, and its management are really top people.
  
• It's P/E ratio is 12, cheap compared to a sector average of 15 and an AllOrds average of 17.
  
• Analysts still maintain their bullish forecasts, I think Goldman & Meryll still retained a $106 target.

Some hedge funds that invest in the sub prime debt market have done very badly, and I won't be suprised seeing a mass of redemptions coming out of those funds as credit risks are being re-assessed. There are some funds that would hedge credit risks, but those that trade on the speculations of credit improvements are most likely hiding under a rock and sheding tears at the moment.

It is also interesting to see how MBL generates its returns. The bank buys assests with its capital, refinances, and then onsold to satellite funds (most likely with other investors' money) for a higher price. The cycle then repeats itself as it financially engineer its earnings. With the economic conditions of the past few years, the bank has made a substantial amount of money partly due to the low cost of debt. But if the global credit market tightens, and the cost of debt increases, it will be much harder for the bank to maintain or increase its earnings growth. Currently, the P/E ratio is around 12. However, if the growth of incomes slows, or, in the worst case, becomes negative, the P/E ratio will be much higher. So, I think that holders of MBL should keep a careful eye on the global credit market, as any negative signs here might point to a possible drop in the bank's growth, and share price would most likely follow suit.

Therefore, personally, I have closed out my positions in MBL last week, and have no immediate intentions of re-entering. Of course, if the sub-prime disaster turns out to be a storm in a teacup, MBL may be testing new heights again soon. But, on the other hand, the bank will find it very tough to continue its current growth rate if the credit market deterioates.

 

[falconx]

Re: MBL - Macquarie Bank

No offence if anyone lives in Toorak in Melbourne, but I hope it was your funds seeings as your houses price have gone up 700k in the last 3 months.

Has this been published anywhere credible recently? I heard Kew has gone up like ~60% over the last year, is this fact or fiction?

 

[explod]

Re: MBL - Macquarie Bank

From Wikipedia on Prechter & EWI:

"In July 2007, the Hulbert Financial Digest, published by Dow Jones, reported that Elliott Wave International's Elliott Wave Financial Forecast had a 15-year annualized return of negative 25.4%/year and a return of negative 17.8% over the life of the newsletter."

Unfortunately, in light of the last 5 years of economic, share market, and property boom activity it looks a lot like Prechters book isn't worth the paper it's printed on. A slightly different slant on the old saying it's not time-in the market, but timing the market that counts.

Yes the timing is everything but in the bigger picture few can do it at all, the reason I am a trend follower.

However the last five years of property boom was manufactured by the US Fed moving interest rates to almost zero, same with the carry trade using low cost Yen, it starting to move up is creating bigtime problems. Prechter's book reads as if it was written today. It does not proclaim a time-line and is fundamentaly sound. What the delay in the economic down turn has in fact done has set us up for a much greater shakeout than would have been the case if sensible policies to tighten credit around 01/02 had occurred.

As for his investment company, many companies have had a hard time in the current climate. The sorts of measures taken by the US Fed have been pretty irresponsible and I suppose one would not have believed it possible five years ago.

Just as telling, and just as irrellevant to our discussion, the US Dollar Index in the last five years is negative 33%

 

[barnz2k]

Re: MBL - Macquarie Bank

open was strong and back over 80 but downhill from there??
Seems a few stocks similar - very strong opening price but then falling back, even below yesterdays close.

 

[Ken]

Re: MBL - Macquarie Bank

Presently MBL is paying around about a 5% dividend full franked.


So even you are holding the stock for 3-5 years... you will get a return of some sort. When The bull market resumes its overall upward trend which it has done on previous corrections. It is definatley possible that MBL is a $120-$150 stock in 5 years.

I looked back at BHP when it was $24, after it had run to $32. And BHP is now $35. Its all part of it.

Is the same happenign with MBL here. Is this power house of a company presenting an opportunity for the people who missed out?

Time will tell.


Looking at the sums, and the general feeling before the subprime stuff, MBL was basically the king of the ASX and there were talks about it taking of RIO and BHP.

The trend changes a lot of peoples veiws on stocks. i have found this with the specs i am holding. Nothing has changed. If stocks didnt have corrections then the market would be very stale. Fear greed factor....

 

[waz]

Re: MBL - Macquarie Bank

With a current price of 66.70 and a 12 month target price of 111.42 (average, and most of these valuations have been done this month)

The upside potential is a staggering 67%

Can any of you think of a time when any Australian bank has had an upside, or even downside potential of more than 50%? Not me

This doesnt make sense, even if earnings were to fall by 20% in the next year, ie EPS from 570 to 450, at a price of 66.70, mbl is sitting on PE ratio of 14.8

In other words, even though most pundits are expecting profit to increase from anywhere from 0 to 18%, even with a 20% fall in profit, whats that, about 300mil. Its future PE is still very attractive.

What do u guys think a worst case scenario is?
Even a 400mil fall in profit mbl is still a bargain.

 

[YELNATS]

Re: MBL - Macquarie Bank

The sell-off in MBL has been astonishing. All the value accumulated in about the last 11 months has disappeared in the last month.

I've not held MBL in the past because of their high pricing, but it's hard to avoid accumulating at these levels.

 

[Gundini]

Re: MBL - Macquarie Bank

I am watching it tumble as I speak, off 30% in 2 months...

At some point today, the Big Boys will snap this up. They have been selling it down in the last hour/day/week/month/months....

 

[Bush Trader]

Re: MBL - Macquarie Bank

The comparison to Enron a few months ago was easily laughed off by many, however I think there a few more beginning to empathise with the "House of Cards" theory

Broke support at $68 next major support $58 minor support $63.

Cheers


BT

 

[Lachlan6]

Re: MBL - Macquarie Bank

Next major support is around $59.0 after breaking strongly through the 150 week EMA. Also corresponds to 50% level from 2002 lows. If this fails, then the next support will be $50.00. But lets see what happens if it hits $59.0 first. Looks ominous at the moment.

 

[>Apocalypto<]

Re: MBL - Macquarie Bank

Mime - have a good look through my post again mate.......

I didn't say anywhere within my post that I thought MBL were frauds...... Plus, Jim Chanos wasn't saying MBL were frauds, he simply said they had severe related party issues and complex off balance sheet debt structures that had the potential to cause issues in the future as they were not properly disclosed with the body of the Companies financials. These are all true facts - draw your own conclusions.

I know the Enron story pretty well (hence my avatar), at the end of the game they (Enron) were fraudulent, but the factors that lead their accounting team to come up with the dodgy strategies in the first place (i.e. Raptors limited partnerships, etc) was actually a legal accounting treatment - mark to market valuation of their deals via a DCF model. The SEC and their auditors signed off to the treatment initially. Have a look at MIG - isn't this exactly what they are doing, revaluing assets using AASB 139 and 132 whilst the group bleeds through cash like no tomorrow.....

Look, you don't have to listen to me - I would say the chart tells you more than I could....

All the best
Reece

Hats off to you Reece you nailed it.

I still remember you made many warnings about MBL long before the true Carnage started, I like i said in another post hope and expectation will be there until u choose not to see it!

Good on u Reece!

 

[reece55]

Re: MBL - Macquarie Bank

Hats off to you Reece you nailed it.

I still remember you made many warnings about MBL long before the true Carnage started, I like i said in another post hope and expectation will be there until u choose not to see it!

Good on u Reece!

Cheers Joe, it's been a dramatic fall out.....

I expected some fairly heavy selling, but MBL is where it was some two years ago in four weeks. I was expecting 70 as a first target, not 62. I also expected it would take a lot longer! Still, it's not the heaviest sold of investment bank - BNB and AFG have actually fared worse, and I much prefer BNB model from an operational perspective from MBL's.....

Interestingly, MBL have been the only ones not saying a thing about their exposure to the liquidity crisis - any rally IMO is a selling op, I would have thought there is more bad news to come from the "house that debt built"!

All the best guys, difficult trading conditions for anyone but the short seller ATM.

Cheers

 

[chops_a_must]

Re: MBL - Macquarie Bank

Interestingly, MBL have been the only ones not saying a thing about their exposure to the liquidity crisis - any rally IMO is a selling op, I would have thought there is more bad news to come from the "house that debt built"!

Yep. I don't understand why these others have been punished so much in comparison, when it looks to me like they have done the "righty". Unlike MBL